China property shares cut to ‘underweight’

BNP slashes 2008 earnings growth for industry to 31%

(HONG KONG) Investors should cut their holdings in Chinese property because of a slowdown in housing starts and home prices that will crimp earnings growth, BNP Paribas said.

The bank downgraded China real estate shares to ‘underweight’ from ‘overweight’, and slashed the 2008 earnings growth forecast for the industry to 31 per cent from 47 per cent, Hong Kong-based BNP analyst Andy So wrote in a research report published today.

‘Housing starts, bank loans and prices all showed signs of slowing down,’ Mr So said in his report. He named Hong Kong-listed Shimao Property Ltd as his top pick in the sector.

Home prices in some of China’s biggest cities including Shanghai and Shenzhen fell in the first two months of 2008 as government efforts to curb the soaring property market started to bite. The government sought to restrain the industry after home prices in 70 major cities surged 10.5 per cent in November and December from a year earlier, the most since the index began in July 2005.

Mr So reduced his price estimates for companies including Beijing Capital Land Ltd, China Overseas Land & Investment Ltd and Guangzhou R&F Properties Co.

Some smaller developers may struggle to maintain profit growth and be forced out of business as banks continue to tighten lending, Standard & Poor’s said in a Feb 28 report.

Source: Bloomberg (Business Times 4 Mar 08)

SHK results may not reflect HK property frenzy

Company holding back most project launches, analysts say

(HONG KONG) An upswing in Hong Kong home sales and prices is boosting big developers but will hardly register in earnings to be reported by Sun Hung Kai Properties this week, as the firm held back on project launches.

With rising wages and falling interest rates sparking one of the city’s legendary frenzies for property, analysts are mostly upbeat about the likes of top developer Sun Hung Kai and rival Cheung Kong (Holdings).

A correction has made stock valuations more attractive after a share price surge last year inspired by the US Federal Reserve’s aggressive rate cuts. Sun Hung Kai is trading at a 20 per cent discount to forecast end-2008 net asset value (NAV), compared to an average historical discount of about 10 per cent.

However, analyst forecasts for underlying earnings for the six months to Dec 2007 are spread widely and evenly between HK$4.7 billion (S$841 million) – which would be down 11 per cent on a year ago – and HK$6.1 billion.

‘They had no new launches except for Harbour Place,’ said Eva Lee, whose forecast for the interim half-year earnings was at the low end of the range. ‘So probably we can expect second-half sales to pick up.’

The 1,000 apartments put up for sale at the Harbour Place project, in the city’s Kowloon district, were quickly snapped up, but the profits will be booked in the second half of Sun Hung Kai’s financial year, which starts in July.

Sun Hung Kai’s earnings announcement, due on Thursday, will be the first time executives will have faced the media since the company’s chairman stepped down temporarily early this month.

Analysts have said Walter Kwok’s decision is unlikely to affect the company’s future performance.

Sun Hung Kai’s share price soared 76 per cent in the second half of calendar 2007, as Hong Kong’s currency peg led authorities to follow US interest rate cuts despite rising inflation and a local economy spurred by booming China.

But the stock has fallen 20 per cent this year and was trading at HK$133.60 at the close yesterday.

JPMorgan analyst Raymond Ngai, who expects an interim profit of HK$6.1 billion, has an overweight rating on the stock with a year-end price target of HK$159.

He expects full-year net profit to rise 35.7 per cent to HK$15.16 billion as apartment sales rise.

But Goldman Sachs analysts Anthony Wu is much more cautious, and has a neutral

recommendation, believing that apartment prices may have already peaked, having gained 10 per cent in the first two months of this year.

‘The rising risk of a prolonged global economic slowdown leads us to believe that the property market up-cycle has probably ended,’ Mr Wu wrote in a recent note.

‘Negative ripple effects will likely hurt Hong Kong’s wage growth, which is far more important than interest rates in driving property demand.’

Hong Kong apartment sales have picked up in the last few months as owning is almost as cheap as renting, and people expect tight supply to lift prices.

According to CLSA analysts, only about 14,000 new apartments will hit the market in each of the next three years, compared to an annual take-up of 20,000 when the economy was in a downturn between 1998 and 2003.

Affordability is back to 2005 levels because of interest rate cuts. So someone who rents a flat worth HK$5 million would pay on average HK$16,700, while a mortgage on 70 per cent of the value would typically mean a monthly repayment of HK$19,000.

Source: Reuters (Business Times 4 Mar 08)

HK Reits get a new lease of life

Major acquisition, hotel trust listing may help revive investor interest

(HONG KONG) Hong Kong’s neglected real estate investment trust (Reit) market is stirring to life and may finally do what it’s supposed to – give investors stability, a decent yield and, possibly, clear prospects for growth.

A high-profile acquisition by office landlord Champion Reit, and the imminent listing of a hotel Reit by developer Far East Consortium, may help revive investor interest.

The reputation of Hong Kong’s Reits has been sullied by investor perceptions that they were used by wily developers to offload second-rate assets at inflated prices, and marred by the byzantine financial engineering that accompanied their deals.

As new Reit markets emerged across Asia, with investors enjoying fat dividends from rental income and capital gains from rising property prices, Hong Kong Reits were given the cold shoulder.

‘It seems like a lot of Reits are like a second concubine – it’s whatever leftover product you have,’ said Far East Consortium chief executive David Chiu.

‘But we’re saying to the market that we’re putting all the hotels we have in,’ he said about the group’s latest offering, a listing of its hotel Reit. ‘You either like it or not, but it’s all of them.’

After a year’s lull in new Reit listings, Far East has lined up an initial public offering (IPO), packaging all seven of its hotels in the city into the Hong Kong Hotel Trust, and moving away from complex financial engineering.

Earlier this month, Champion Reit said it would dismantle the complicated financial structure linked with its IPO, and also bought a 56-storey block in Hong Kong’s Kowloon district.

Hong Kong’s biggest developer, Sun Hung Kai Properties, is also considering resurrecting a planned office trust, while Swire Pacific wants to spin off its Festival Walk shop and office complex, bankers say.

Hong Kong’s Reit market made an explosive start in late 2005 when investors flocked to a US$2.4 billion IPO by Link Reit, drawn by pledges to revamp and squeeze more profit from 151 government-owned malls.

But the city’s six other Reits, including two with mainland Chinese assets, have fared worse on the secondary market, with their yields pushed up to between 8 and 10 per cent now from 5 to 6 per cent at their IPOs.

However, their share prices stabilised despite turbulent markets in the last six months, while Japanese and Singapore trusts slumped, and they now offer big and steady spreads over the 3.1 per cent yield given by 10-year bonds.

Comparable spreads for Reits in Japan and Singapore are much lower, at around 3.5 percentage points.

But high yields and cost of capital mean Hong Kong Reits often struggle to find acquisitions that are ‘yield accretive’ – or lift investor returns.

However, by using loans, a convertible bond issue, and new equity raising, Champion’s Reit has managed to buy Langham Place from the Reit’s sponsor, Great Eagle (Holdings), for US$1.6 billion.

The deal is getting a belated thumbs-up from analysts after initial suspicions the trust was paying too much.

‘Don’t overreact, this is a positive deal,’ wrote BNP Paribas analyst Andy So, when Champion’s share price slumped 5 per cent a day after the deal was announced.

He said the purchase would lift distribution per unit, despite dilution from the share sale, and praised the unwinding of financial engineering that had been unpopular with investors.

The trust had employed interest rate swaps and a dividend waiver by Great Eagle, that artificially lifted yields at the time of the IPO.

It now wants to unwind and simplify that structure.

With Champion embarking on a global roadshow to raise equity for the deal, a banker who worked on the transaction predicted it would herald a new beginning for Hong Kong Reits.

Source: Reuters (Business Times 28 Feb 08)

Chinese developer bond risk rises to a record

(HONG KONG) The risk of Chinese real estate developers defaulting on their debt soared to a record on concern they will seek to sell securities after Country Garden Holdings Co completed its first convertible bond sale.

Three-year credit-default swaps on Country Garden traded at 1,100 basis points at 4:27pm in Hong Kong, according to BNP Paribas SA prices. Five-year contracts on Shimao Property Holdings Ltd rose 75 basis points to 975 basis points while swaps on Agile Property Holdings also increased 75 basis points to 1,000 basis points. A basis point is 0.01 percentage point.

The first public bond sale by a Chinese real estate developer since November showed investors are becoming more confident in the long-term outlook of the sector’s biggest companies. House prices in China shrugged off government curbs on lending to rise 10.5 per cent in December from a year earlier, maintaining the fastest pace since records began in 2005.

‘It’s generally a good thing for Country Garden to be able to raise the funds, but the deal also opens the gate for other debt fund-raising from Chinese real estate companies,’ said Arthur Lau of JF Asset Management Ltd in Hong Kong, who helps manage US$128 billion of assets. ‘People are worried that bond sales will scramble to come to the market, not just from Country Garden but also from other developers.’

Country Garden’s share price jumped as much as 15 per cent yesterday. The stock closed up 12 per cent at HK$7.48 in Hong Kong.

Country Garden, China’s most profitable property developer, last week raised 3.6 billion yuan (S$709.3 million) selling convertible debt maturing in 2013. Investors can hand over the bonds for Country Garden’s shares at HK$9.05 apiece, which is 37 per cent more than the average price as weighted by volume on Feb 15, according to an e-mail sent to investors.

Country Garden’s 2.5 per cent convertible bonds now trade at 104.15 per cent the face value, according to Nomura Holdings Inc prices. Country Garden’s debt is rated the lowest investment grade at BBB- by

Standard & Poor’s. Moody’s Investors Service ranks it one step lower at Ba1.

Credit-default swaps on Greentown China Holdings Ltd rose 50 basis points to 1,175 basis points.

Contracts on Hopson Development Holdings Ltd jumped 50 to 1,250 basis points, according to BNP Paribas. That means it costs US$1.25 million a year to protect US$10 million of Hopson’s debt from default for five years. It implies a more than 65 per cent chance of default in the next five years, according to a valuation model by JPMorgan Chase & Co.

Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company’s ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A rise indicates deterioration in the perception of credit quality; a decline, the opposite.

New bond sales increase the risk of default as they add more debt to the companies.

The credit risk of Chinese real estate developers has exceeded that of their troubled peers in the United

States on concern that China’s government will announce new measures to more effectively rein in rising property prices, and that developers will need to sell more debt to fund expansion or risk losing market share to rivals.

High-yield bonds of US home builders hurt by the sub-prime loan crisis now trade at an average 10.55 percentage points more than US Treasuries, according to a Merrill Lynch & Co index that tracks 93 securities. Greentown’s 9 per cent US$400 million bonds maturing in 2013 trade at a record 12.56 percentage points above US government bonds, up 64 basis points from Friday, according to ING Groep NV prices. Hopson’s 8.125 per cent US$350 million securities due in 2012 widened 90 basis points to a record 12.78 percentage points over US Treasuries.

Investors should price in more risk on the bonds of Chinese property developers to reflect the weak structures of the deals and the untested legal system for defaults in China, analysts led by Hong Kong based Pradeep Mohinani at Lehman Brothers Holdings Inc said in a research note on Feb 15.

‘We reiterate a more defensive investment strategy and recommend investors to avoid this highly volatile sector in the near term because of rising industry and supply risks,’ the Lehman analysts wrote in the report.

Bonds of Chinese developers should trade at between 150 to 180 basis points more than their US peers,

the analysts said.

Source: Bloomberg (Business Times 19 Feb 08)

CentraLand to tap into commercial property market

It says China’s anti-speculative measures won’t hit property prices

CHINESE property developer CentraLand Ltd is poised to tap into the commercial property market in the city of Zhengzhou with its ongoing development of J-Expo, a wholesale commodities building located in the heart of Zhengzhou city.

Yan Tao, executive director and chief executive officer of CentraLand, said in Mandarin that he has been observing the property market for the past 10 years and recognised a demand in the commercial property market which other industry players had failed to meet adequately.

Located at the junction of the main road and rail network in Central China, Zhengzhou city enjoys good traffic and is an important wholesale centre, especially for women’s apparels.

Branding itself as a premium brand property developer, CentraLand specialises in high-end residential and commercial developments.

Mr Yan said that the recent anti-speculative measures of the Chinese government have had minimal impact on his company.

This is because its target consumers are either well-heeled residents in Henan province who pay cash for their residences in developments like Guoling Shanshui in the suburban area of Zhengzhou city or businessmen who buy retail and office units in J-Expo.

These consumer habits are unlikely to change due to the cooling measures.

Mr Yan said: ‘The measures are not meant to bring down the property prices in China.

‘Rather, they are implemented to ensure that property prices continue to rise, albeit in a healthy and progressive way.’

Mr Yan said that the measures are aimed at the ‘bubble’ created due to the phenomenal growth in major cities like Beijing and Shanghai.

Hence, the impact of the measures is not that great on second and third-tier cities like Zhengzhou.

Mr Yan believed that the China property market presents more opportunities than challenges due to the rising affluence of its people.

Referring to a Chinese saying that one shop can support three generations of a family, Mr Yan believed that the typical Chinese businessman would be more than willing to invest in a shopfront as his disposable income increases.

Mr Yan also considered the recent listing on the Singapore Exchange (SGX) as a strategic move in terms of talent management.

His company’s listing in Singapore is expected to increase the appeal of the company to promising talents.

Already, the listing has helped Mr Yan persuade a friend from Carrefour China to join his company.

Mr Yan is confident that with the listing, his company would be able to offer higher salaries to its employees. This should help to retain talent in the company too.

While it had considered Hong Kong, CentraLand decided that SGX was more suitable for its medium-sized operations since there are already many larger players in the Hong Kong market.

Instead of being a medium-sized fish competing with bigger fish in the unexplored seas, the company would rather be in familiar waters.

CentraLand also chose Singapore over other South-east Asian countries based on the recommendation and experience of CentraLand’s other major shareholder, Li Wei, who owns Synear Food Holdings, a Singapore-listed frozen dumpling maker in Zhengzhou city.

Mr Yan believed that with a clear strategy, efficient management team and strong financial background, the company should be able to face the everyday challenges in the property market.

Following the listing on SGX, CentraLand’s operations will continue to concentrate geographically in the city of Zhengzhou in Henan province but the company is consistently on the lookout for opportunities to expand.

CentraLand shares closed 0.5 cents higher on Wednesday at 60.5 cents with 1.1 million shares traded.

 

Source: Business Times 9 Feb 08

Chinese property developer CentraLand launches IPO

Zhengzhou-based firm’s shares priced at 50 cents; offer closes on Jan 30

CHINESE property developer CentraLand Ltd yesterday launched its initial public offering (IPO) of 245 million new shares at 50 cents each for a mainboard listing on the Singapore Exchange.

The company, based in the city of Zhengzhou in Henan province, expects to raise net proceeds of about $113.9 million, after expenses.

The IPO comprises five million shares available to the general public and 240 million placement shares.

CentraLand said that at 50 cents each, the offer shares are priced at a discount of about 11.3 per cent to its estimated net tangible assets per share of 56.4 cents as at end-June last year.

CentraLand chief executive Yan Tao said: ‘Our listing marks the beginning of a new phase for CentraLand and serves as a launching pad for us to take CentraLand to its next phase of growth.’

Of the expected $113.9 million in net proceeds, $38.3 million will be used to buy land, $70.6 million to boost a subsidiary’s capital base, and the rest as working capital.

The company is banking on increasing investment in property developments in Zhengzhou, growth in the city’s population and rising disposable income among the city’s residents to drive its growth.

The company’s revenue rose 89.9 per cent to 276.5 million yuan (S$55.2 million) in 2006 – based on its most recent audited full-year financial statements – from 145.6 million yuan in 2005. Its net profit in 2006 was 45.4 million yuan, up from 15.1 million yuan the previous year.

For the first six months of 2007, the company recorded revenue and net profit of 150.8 million yuan and 17.8 million yuan respectively.

Boulton Capital Asia is the issue manager and UOB Kay Hian is the underwriter and placement agent for CentraLand’s IPO.

The IPO opens today and closes on Jan 30. The shares are expected to begin trading on Feb 1.

 

Source: Business Times 23 Jan 08

Once-hot China real estate sector cools down

(SHANGHAI) After booming in recent years, China’s real estate market is finally starting to feel the pinch from sagging demand and tighter controls.

One of China’s biggest real estate agencies, Chuanghui Real Estate, has shuttered dozens of outlets in Shanghai and other cities, leaving angry customers and employees, after an ill-timed expansion just as the market was peaking. Many other agencies around the country have also closed down.

So far, the retrenchment appears to be mainly limited to property brokers. But the moves could herald the beginning of a broader slowdown in one of Asia’s hottest real estate markets.

The government has been wrestling to get control of the property sector, worried that rising prices for housing are pushing poorer Chinese out of the market at a time when overall inflation is surging.

Regulators stepped up curbs on the property market last year, alarmed that ‘bubbles’ in property prices could collapse and trigger a financial crisis. Those efforts are starting to take effect. While urban housing prices last month rose 10.5 per cent from a year earlier, a sharp slowdown in sales transactions in recent weeks suggests a new trend.

In the first week of 2008, home sales in Beijing fell 20 per cent compared with the previous week, the state-run newspaper China Securities News reported. Sales were off 38 per cent in Shenzhen and 52 per cent in east China’s Nanjing, it said.

Realtors say the slump started late last year but due to various reasons, like land supply and property hoarding by developers, the impact hasn’t been seen yet in prices.

So far, there are no signs of a mortgage meltdown in China similar to that seen in the US, and experts don’t foresee property prices to fall substantially. Strong economic growth and surging demand from upwardly mobile families are supporting demand.

But business is slowing, especially for the so-called ’second-hand’ apartments, or existing, rather than newly built homes, that are the lifeblood of local realtors in this recently commercialised market.

‘In 2008, we think property developers will face some liquidity problems and financing issues,’ Matthew Kong of ratings agency Fitch Asia Corporates said recently.

 

Source: AP (Business Times 22 Jan 08)

Real estate firm’s offices smashed after closures

Customers and staff lash out; company blames China govt policies for its woes

BEIJING – EMPLOYEES and customers of a leading real estate company have smashed its offices after the closure of some 1,000 of its branches across China.

Chuanghui said it had closed more than half of its 1,800 outlets since October.

A company official blamed the company’s woes, including an 80 per cent drop in its Shanghai business, on government policies to cool the real estate sector and rein in credit growth.

‘The market has taken a turn for the worse and our deals have dropped a lot,’ Mr Zhang Min, Chuanghui’s corporate planning director, told the media from the company’s headquarters in Shenzhen.

A second official, quoted in the local media, said Chuanghui’s problems stemmed from a costly expansion in Shanghai.

There was no word on how the company will compensate affected employees and customers.

New rules preventing people from obtaining mortgages on second homes, coupled with a government freeze on new bank lending at the end of 2007, have begun to hit China’s real estate market.

Prices fell 20 per cent in December alone in both Beijing and Guangzhou, the state media reported, without specifying whether they were referring to new or existing homes.

The authorities have previously sounded the alarm about surging prices, asking developers to build more affordable housing.

‘The government is obviously keenly aware that most people’s big investments are in residential property, so they’re very sensitive to it and don’t want big price moves,’ said Mr Michael Hart, managing director of property services firm Jones Lang LaSalle in Tianjin.

‘There is no good way to have a perfect balance, so that’s the government’s challenge,’ Mr Hart said.

All of Chuanghui’s offices in four Pearl River Delta cities, including Guangzhou, were closed on Tuesday, while dozens more in Shenzhen and two other southern cities were also shut, local media said. The company has announced plans to withdraw from Shanghai on Jan 11.

Mr Zhang added that Chuanghui’s cuts would help it stay afloat. But speculation that Chuanghui could face bankruptcy has panicked its employees and customers.

One photo on a newspaper website showed people standing in front of locked doors with a sign reading: ‘Chuanghui, give us back our hard- earned money.’

The People’s Daily reported in its online version that some of Chuanghui’s offices in southern Guangdong province were smashed. Computers and printers were missing from the offices, said other reports.

A teacher with the surname Liang said she had paid Chuanghui more than 10,000 yuan (S$2,000) for an apartment, but had not got her title deed.

An employee, identified by his surname Wang, returned to his former office to collect pay arrears only to find it empty.

 

Source: REUTERS (The Straits Times 17 Jan 08)

Yanlord has landbank in 8 Chinese cities

For 9 months last year, value of pre-sold units doubled to $1.1 billion

ONE of the companies whose shares are joining the STI this year is Yanlord Land Group, a top-tier property developer in China. Founded in 1993 by chairman Zhong Sheng Jian, who is now a Singaporean citizen, Yanlord has expanded its landbank into eight Chinese cities with exposure to the country’s rapid industrialisation.

The group is one of China’s leading property developers in terms of revenues, with some $952 million in net sales in 2006, and $171 million in net profits.

Yanlord, which at yesterday’s closing price of $2.70 had a market value of $4.89 billion, saw nine-month sales and net profits fall significantly year-on-year at the end of the 2007 third quarter.

But the group said at the time it has a positive full year outlook. It pre-sold nearly $1.1 billion worth of apartments in 9M07, almost double that for the same period of the previous year, and expects to record the bulk of the sales in the fourth quarter.

As of the end of last September, Yanlord had a total land bank of just over 4 million square metres (sq m) in gross floor area (GFA). Of this, about 1.5 million sq m are under development, with another 2.5 million sq m held of future development.

Projects are underway in Shanghai, Nanjing, Suzhou of the Yangtze River Delta, in Zhuhai and Shenzhen of the Pearl River Delta, in Tianjin to the north-east, and in Chengdu and Guiyang in Western China.

Shanghai accounts for the largest proportion, or over two-fifths, of the group’s projects currently underway, with Chengdu, Nanjing and Suzhou also with major portions.

Yanlord’s future landbank, though, is less weighted toward Shanghai, which accounts for just 8 per cent; instead, second-tier cities like Nanjing, Zhuhai, Shenzhen and Tianjin comprise the bulk of the land.

Mr Zhong, the company’s founder, was one of the first to capitalise on Chinese rule changes in 1988, which allowed people to own their homes for the first time in the Communist country.

Already a businessman with interests in the manufacture of bottlecaps, fertiliser and paper – a group he had built out of trading raw materials and paper in the 1980s – Mr Zhong next directed his capital to property development.

Anticipating the rise of an affluent class in China, he avoided building bare basics homes for the masses and instead constructed high-end apartments in Shanghai that won a name among yuppie buyers. Yanlord’s selling costs are said to be lower than those of other developers, because of the brand name it built over the last two decades.

Mr Zhong himself visited Singapore in 1988, en route to Australia, and decided to settle here. His wife, five children, and seven siblings (five brothers and two sisters) also reside here.

 

Source: Business Times 10 Jan 08

Beijing to expand CBD fourfold

(BEIJING) Beijing is to relocate several thousand households to quadruple the central area of the Financial Street district, where many banks and insurers are headquartered.

The district is to grow from the current 1.18 square kilometres to 4.77 sq km. Most of those to be relocated live in the western part of the area, the Beijing News reported yesterday.

‘The areas involved are established residential communities (which has) increased the difficulty of the relocation project,’ the newspaper quoted an official with the Financial Street Expansion Office as saying.

He said there was no timetable yet.

Those to be relocated will be offered larger housing if they agree to move beyond the Third Ring Road, one of the major loop highways in Beijing’s heartland.

The Beijing municipal government is also drawing up policies to encourage non-financial institutions to move out of the area, making Financial Street the heart of Beijing’s financial industry.

A gigantic underground road network is planned under the central area of the district, which will mirror the above-ground system, even having traffic lights and road signs.

The 2.4km network will join up with major streets such as the western part of the Second Ring Road and Taipingqiao Street. It will also join the parking lots of office buildings.

 

Source: Xinhua (Business Times 10 Jan 08)

China property bond risk rises to record

Analysts cite moves to cool market, curb loans to developers to fund expansion

(SINGAPORE) The risk of property developers in China defaulting on their debt rose to a record, according to traders of credit-default swaps.

The cost to protect bonds sold by Agile Property Holdings Ltd, Shimao Property Holdings Ltd and Hopson Development Holdings Ltd rose by as much as 80 basis points, the most on record, outpacing an 18 basis point increase in the Markit iTraxx Asia Ex-Japan Series 8 Index of 20 high-risk, high-yield borrowers, according to BNP Paribas SA.

Intensifying efforts by the government to cool the property market and aggressive borrowings by Chinese builders to fund their expansion sent the risk they may default on their debt to record highs, according to Mark Lo, a Hong Kong-based credit analyst with BNP Paribas.

‘I am bearish on this sector,’ said Mr Lo. ‘There is downside risk and limited upside for bond investors.’

Shimao and Agile, contributing to a 29 per cent surge in property investments in the 12 months ended August, may deplete cash reserves and depend more on sales to service debt, analysts at Moody’s Investors Service said in a Nov 6 report.

The contracts tied to the debt of Shimao, Hopson and Agile traded at 560 basis points, 680 basis points, and 650 basis points respectively at 5.13 pm in Hong Kong yesterday.

Credit-default swaps on Shanghai-based Greentown China Holdings Ltd debt rose 80 basis points to a record 800 basis points, according to BNP Paribas.

The government increased minimum down payments on apartments to 40 per cent from 30 per cent in September and ordered banks to raise reserves by the most in four years on Dec 8. Lenders must put aside 14.5 per cent of deposits as reserves, starting Dec 25, up from 13.5 per cent.

Credit-default swaps are financial instruments based on bonds or loans that are used to speculate on a company’s ability to repay debt. They were conceived to protect bondholders by paying the buyer face value in exchange for the underlying securities should the borrower default.

Potential issuance from Chinese real-estate companies with at least a BB rating may be US$15 billion, more than the current outstanding market of less than US$4 billion, said Todd Schubert, a credit analyst with Deutsche Bank AG in a Dec 7 report.

The rising borrowing costs prompted Country Garden Holdings, China’s most profitable developer, to shelve its US $1.5 billion bond sale. Investors snubbed yields of up to 10 per cent offered by the company in November.

 

Source: Bloomberg (Business Times 10 Jan 08)

Bond yields point to huge property bubble in China

HONG KONG – THE bond market is telling Asia’s richest man Li Ka Shing that he is sitting on a Chinese property bubble that is bigger than the one deflating in the United States.

Bonds of China’s Agile Property Holdings yield 7.03 percentage points more than US Treasuries, double the premium in July and 1.65 percentage points more than the debt of Los Angeles-based KB Home, which has the same credit rating.

Agile, a housing developer in the southern province of Guangdong, and Country Garden Holdings, China’s most-profitable builder, cancelled debt sales in November when borrowing costs climbed.

As China’s government attempts to cool property prices with limits on lending, developers have embarked on a land grab.

Mr Li, who made his fortune in Hong Kong real estate, and hundreds of local developers boosted investment by 29 per cent in the first eight months of last year, the National Bureau of Statistics said.

‘If the government decides to impose further restrictions, most if not all of the developers will go bankrupt, depending on the severity of the restrictions,’ said Mr Eugene Kim, the chief investment officer of Hong Kongbased hedge fund Tribridge Investment Partners.

‘That makes us very selective in terms of which bonds we buy and the spreads we require to compensate for risk.’

Mr Kim said he has trades set up that would profit from a decline in prices. Merrill Lynch, the world’s biggest brokerage, rates China property companies as ‘underweight’, meaning investors should own a smaller percentage of the debt than contained in benchmark indexes.

Home prices in Shenzhen, a city north of Hong Kong, were 18.6 per cent higher in November than a year earlier, according to a National Development and Reform Commission survey. They rose 14.9 per cent in the capital city of Beijing and 16.4 per cent in Beihai, in Guangxi province.

The People’s Bank of China last month raised its benchmark one-year lending rate to a nine-year high and increased reserve requirements to the most since at least 1998. Beijing increased the minimum down payments on apartments to 40 per cent from 30 per cent in September.

Signs of a shift are already emerging. The nation’s largest publicly traded developer, Shenzhen-based China Vanke, sold property worth 4.23 billion yuan (S$833 million) in November, 18 per cent less than in October.

Chinese developers are among the most vulnerable of any group in Asia to downgrades because a slowdown in home sales would deplete cash, said Ms Clara Lau, an analyst at Moody’s Investors Service in Hong Kong.

‘They have been growing aggressively, with the view that if they don’t buy now, it will be more expensive for them later’ to acquire land, Ms Lau said.

Standard & Poor’s cut the credit ratings of Greentown China Holdings, the largest builder in Zhejiang province, by one level to BB- on Dec 3 due to ‘increasingly aggressive land acquisitions’.

Greentown China’s US$400 million (S$573 million) of 9 per cent bonds yield 11.2 per cent, up from 9.6 per cent in November.

THE rapidly rising yields in China’s bond market are telling Mr Li Ka Shing, Asia’s richest man, that he is sitting on a property bubble which is bigger than the one deflating in the United States.

Bonds of China’s Agile Property Holdings yield 7.03 percentage points more than US Treasuries, double the premium in July and 1.65 percentage points more than the debt of Los Angeles- based KB Home, which has the same credit rating.

 

Source: BLOOMBERG NEWS (The Straits Times 10 Jan 08)

China probes foreign investment in property

(BEIJING) China has launched a nationwide probe into foreign investment in the red-hot real estate market, state media said yesterday, while mulling new measures should existing limits prove ineffective.

The State Administration for Industry and Commerce at the end of November had ordered branches across the country to carry out the probes, the Shanghai Securities News reported.

It is a sign of problems in the enforcement of previous restrictions, the report said, citing an unnamed industry insider who participated in a recent government seminar on limits on foreign investment.

New tightening measures are highly likely to be introduced this year if the probes prove that existing limits were ineffective, the source added.

Foreign investment in China’s real estate market surged in 2007 despite a series of measures introduced since 2006 tightening approvals and stepping up supervision of direct foreign participation in the industry.

Latest official figures showed that the total value of foreign investment in the market soared by 71.9 per cent in the first 11 months of 2007 to 53.9 billion yuan (S$10.6 billion), stoking fears that a bubble may be emerging.

The State Administration for Industry and Commerce declined to comment on details of the investigations .

 

Source: AFP (Business Times 8 Jan 08)

Beijing cracks down on hoarding of land

(BEIJING) China took aim yesterday at real estate developers that hoard land in the latest government initiative to increase the supply of housing and curb property inflation.

Land acquired from local governments that goes undeveloped for more than a year will be subject to an ‘idle land charge’ of 20 per cent of the purchase price, according to a notice on the central government portal www.gov.cn.

If the land has not been developed after two years, ownership will revert to local governments, the statement said.

Compensation is not guaranteed.

The notice, which extends nationwide policies that are already being pursued in some Chinese cities, requires local governments to report to Beijing by the end of June on the progress they have made in stamping out land hoarding.

Beijing has vowed to improve land use efficiency so that it can sustain its economic growth. China’s economy was forecast to expand by about 11.5 per cent in 2007.

The government has also pledged to keep at least 120 million hectares of arable land so it can feed the country’s 1.3 billion population. China is facing increasing difficulties in feeding its people, partly due to the widespread conversion of its farming areas into industrial zones and residential areas, as well as the impact of global warming.

‘(Saving land) is related to the survival of our nation and the long-term interests of the state,’ the notice said .

 

Source: Reuters (Business Times 8 Jan 08)

Yanlord acquires site for residential devt in Shanghai

REAL estate developer Yanlord Land Group is extending its presence in Shanghai through the purchase of a residential development site for 600.4 million yuan (S$118.7 million).

Yanlord subsidiary Shanghai Renjie Hebin Garden Property Co acquired the 117,459 square metre site in Qingpu District in a government auction last month.

Commenting on the acquisition, Yanlord chairman and chief executive officer Zhong Sheng Jian said: ‘Shanghai remains a key focus in our expansion strategy.’

He said the acquisition, together with the acquisition last November of the New Jiangwan Urban Area site in Shanghai Yangpu District, shows the company’s continued confidence in the potential of the Shanghai real estate sector.

‘This latest acquisition not only replenishes our land bank in Shanghai, in which we have been the early entrants since 1993. More importantly, this newly acquired site also allows us to further establish our foothold in the rapidly emerging Qingpu District where our Shanghai Yunjie Riverside Garden Phases 1 and 2 are located,’ he added.

The site has a view of Yangli Jing River, Dingpu River and Daying Harbour. With a plot ratio of 1.0, the site cost 5,112 yuan per sq metre of gross floor area. Yanlord plans to develop the site into a high-end residential development comprising low-rise and townhouse apartment units.

Yanlord Land is based in China and focuses on developing high-end integrated residential projects and integrated property development projects in high-growth cities in China.

Yanlord entered the China market about 15 years ago and developed a number of large-scale residential property developments with international communities of residents, such as Yanlord Gardens, Yanlord Riverside Gardens, Plum Mansions and Orchid Mansions.

 

Source: Business Times 4 Jan 08

Factory, property spending growth slows on loan curbs

Industrial output in Nov grows slowest, while loans rose the least in 8 months

(BEIJING) China’s factory and property spending growth has slowed – another sign that government lending curbs may be starting to cool the world’s fastest-growing major economy.

Fixed-asset investment in urban areas rose 26.8 per cent in the first 11 months from a year earlier, the statistics bureau said yesterday, after gaining 26.9 per cent through October. Economists calculated November’s increase at about 26 per cent, down from October’s 30.7 per cent.

Industrial output grew at the year’s slowest pace in November, outstanding loans rose the least in eight months and export growth stayed at reduced levels. Those signs may do little to ease central bank concern that the economy is overheating after inflation surged to an 11-year high and the trade surplus swelled.

‘It’s a slight moderation in connection with the tightening efforts but growth is still very strong,’ said David Cohen, an economist at Action Economics in Singapore. ‘Another interest rate increase before the end of the year would be consistent with avoiding overheating.’

The yuan traded at 7.3712 at 12:07pm after closing at 7.3692 on Thursday. The yield on a 15-year bond was little changed at 4.72 per cent.

The median estimate of 18 economists surveyed by Bloomberg News was for a 26.6 per cent increase in 11-month investment.

Investment in the oil and natural-gas industries rose 9.6 per cent through November, a slower pace than the 12.3 per cent gain in the first 10 months. Railways and transportation also had weaker growth.

Spending in the first 11 months rose to 10.1 trillion yuan (S$1.98 trillion), more than the size of Canada’s gross domestic product last year.

‘It’s too early to call it a slowdown – we need three months of data,’ said Stephen Green, senior economist at

Standard Chartered Bank in Shanghai. He predicts three interest rate increases next year, more investment controls, and a faster pace of yuan appreciation that will slow inflows of cash from exports.

Investment accounted for 42.5 per cent of China’s GDP in 2006, compared with 24 per cent in Japan, 20 per cent in the US and 17 per cent in Germany. The number of new projects rose by 24,124 from a year earlier to 211,127 in the first 11 months, the National Bureau of Statistics said yesterday.

 

Source: Bloomberg (Business Times 15 Dec 07)

Pawn one property to buy another

(BEIJING) As bank loans for property dwindle, an increasing number of prospective buyers are turning to pawnshops to finance their plans.

Wang, a 40-year-old Beijinger, owns an apartment worth about 700,000 yuan (S$136,000) in the capital.

His desire to move to a larger second-hand apartment worth about one million yuan hit a snag when the owner demanded payment in full. Wang, however, only had slightly more than 600,000 yuan.

People who have already bought houses with a bank loan are required to make a downpayment of 40 per cent of the purchase price. And the loan interest rate should not be lower than 1.1 times the central bank’s benchmark rate.

With the new rules blocking his dream, Wang turned to a pawnshop. He chose to mortgage his first apartment for 400,000 yuan with Beijing Huaxia Pawnshop Co.

He then registered with a real estate agent to sell his first apartment. He soon made a deal where the buyer agreed to give him a downpayment of 400,000 yuan. With the money, Wang paid off his pawnshop loan and ended up buying the larger apartment without a bank loan.

Li Tiejun, a Beijing Huaxia Pawnshop Co manager, said that since the banks had tightened the rules for loans on second apartments, real estate loan volume at his pawnshop had soared 40 per cent.

Likewise, Xu Yunpeng, manager of Beijing Bao Rui Tong Pawnshop, claimed its trade volume in real estate had risen 30 per cent since September.

Some pawnshops advertised for potential customers by claiming that they would give out money for mortgages within three to five days.

 

Source: Xinhua (Business Times 8 Dec 07)

Beijing to probe steep housing prices

Teams will be sent to check if policies to calm market are being enforced

(BEIJING) China’s cabinet will send teams to major cities next week to investigate whether policies to cool the sizzling property market are being enforced properly, sources said.

Beijing has introduced a series of policies over the last few years to curb surging prices and provide more affordable housing but apparently to little effect, as prices have continued to rise steeply, especially in big cities like Shenzhen.

Sources said that the investigation would last about two weeks and would focus on the twin issues of price and supply.

‘Investigative teams will be sent around the country on Monday and will cover key cities that have had rapid property price increases in every province,’ said a source.

According to official figures, housing prices in China’s major 70 cities jumped 9.5 per cent in October this year from a year earlier, accelerating from an 8.9 per cent rise in September and 8.2 per cent in August.

Housing prices are not only a financial issue but also, increasingly, a political one. Chinese Premier Wen Jiabao said during his visit to Singapore last month that housing was his biggest concern regarding Chinese people’s livelihood.

The investigative teams will draw officials from different ministries, including the Ministry of Construction, the National Development and Reform Commission and the Ministry of Finance, sources said.

China conducted a similar investigation in September 2006, covering 11 provinces.

 

Source: Reuters (Business Times 8 Dec 07)

Allgreen takes on 7 China developments

It will work with Kerry Holdings, Kerry Properties on the commercial, residential projects

ALLGREEN Properties of Singapore is set to move into China in a big way with seven commercial and residential developments together with Hong Kong publicly listed companies Kerry Holdings and Kerry Properties. All the companies are controlled by Malaysian tycoon Robert Kuok.

The projects, which have a total investment amount of 29.3 billion yuan (S$5.73 billion), will be in the cities of Hangzhou, Chengdu, Qinhuangdao and Shenyang.

In a statement released yesterday, Allgreen said that this was in line with the group’s strategy to expand regionally, especially in China, which it views as a ‘long-term growth market’ providing ‘growth and recurrent income’.

Allgreen said: ‘In addition, the group will also be able to better allocate assets to ride out any downturn in the Singapore economy.’

The projects will mostly be residential but hotel, offices and commercial properties can also be expected. These projects also represents the group’s fourth investment in China.

Allgreen appointed Savills while Kerry Properties appointed DTZ Debenham Tie Leung to carry out valuations of the sites and the agreed property value was about 8.64 billion yuan.

Based on the agreed property value, the outstanding land cost and the non-property net asset value of the joint venture companies, the aggregate consideration payable by Allgreen for its acquisition of the equity interests in the joint venture is estimated to be about 967 million yuan.

Allgreen said that the group will fund the project by internal funds and/or external borrowings.

The statement also noted that the group’s aggregate maximum total investment amount in the joint venture is 6.98 billion yuan, representing about 96.2 per cent of its latest net tangible assets as at Dec 31, 2006.

No development time frame was given for the projects.

There is a mixed-use development planned, comprising hotel, offices, retail podiums and apartments on a 67,374 sq m site near West Lake in Hangzhou with a total investment amount of 5.34 billion yuan and Allgreen will hold a 10 per cent stake.

Also in Hangzhou will be a residential development on a 104,521 sq m site at Xiacheng District with a total investment amount of 1.83 billion yuan, of which Allgreen will hold a 35 per cent stake.

Another residential development is slated for Chengdu’s Hi-Tech Industrial Development Zone. To be built on a 46,130 sq m site, it will have a total investment amount of 1.38 billion yuan, of which Allgreen will have a 25 per cent stake.

Allgreen will also hold a 25 per cent stake in a second residential development on a 38,617 sq m site in Chengdu’s Hi-Tech Industrial Development Zone with a total investment amount of 1.16 billion yuan.

In Qinhuangdao, Allgreen will hold a 10 per cent stake in a mainly residential development on a 113,393 sq m site in the West Section of Hebei Street, Haigang District with an investment amount of 2.2 billion yuan.

Also in Qinhuangdao is another residential development on a 92,250 sq m site at the West Section of Hebei Street, Haigang District with an investment amount of 1.35 billion yuan, of which Allgreen will have a 10 per cent stake.

A mixed-use development has been planned for the 172,694 sq m site on the East Side of Qingnian Street, Shenhe District in Shenyang with a total investment amount of 16 billion yuan. Allgreen will take a 30 per cent stake in this project.

 

Source: Business Times 7 Dec 07

China developer buys Sentosa Cove plot

Firm pays $216m, plans ultra-posh marina enclave with jumbo units

A CHINA developer has ventured overseas for the first time and paid a higher-than-expected $216 million for a landed plot on Pearl Island in Sentosa Cove.

The deal is another indication that, while Singapore developers are taking a cautious approach in the wake of the sub-prime crisis, foreign firms are happy to muscle in.

Ximeng Land beat six other bidders, which were not named, to the 14,840 sq m plot, which has a maximum gross floor area (GFA) of 11,872 sq m and can accommodate 19 villas.

It paid about $1,350 per sq ft (psf) for the plot. This is more than double the prices chalked up on the nearby Sandy Island but still below those paid for some individual seafront bungalow plots, which have sold for as much as $1,696 psf.

In September, a landed plot was sold to a developer for $1,099 psf of potential GFA.

Ximeng Land is owned by the majority shareholders of Ximeng Asset Holdings, the parent company of luxury developer Beijing Ximeng Real Estate. The company has built projects in Beijing and two other mainland cities, Yantai and Jinan.

The foreign factor also cropped up late last month when Malaysia’s YTL Corp bought Westwood Apartments in Orchard Boulevard for $435 million. The $2,525 psf per plot ratio (psf ppr) price was a record for a collective sale.

‘These foreign developers have displayed great confidence in the strength of the property market in Singapore,’ said Knight Frank’s director of research and consultancy, Mr Nicholas Mak.

While up to 19 villa units with private berths can be built on the Pearl Island plot, Ximeng said it might build just nine large bungalows, which it expects to fetch record prices.

Property consultants said the nine houses would each be at least 14,000 sq ft, a size not yet available in Sentosa Cove. For the project to be viable, each would need to sell for at least $30 million.

A Ximeng spokesman said it was attracted by the success of Sentosa Cove and its own success in Singapore will provide a springboard for expansion in the region and beyond.

It wants to develop Pearl Island into an ‘ultra-luxurious, world-class marina enclave for the privileged few’ and therefore plans to retain an internationally renowned architect for the project.

Pearl Island is the last of five island sites in Sentosa Cove, all slated for landed homes. There is just one condo plot left – the tender closes next Wednesday; the results are expected to come out early next year – and two individual sea-facing bungalow sites.

Prices at the 99-year leasehold Sentosa Cove have climbed significantly since sales began in 2003, when the property market was still in a slump.

Last month, two seafront bungalow plots were sold at a high of $1,696 psf, said master planner Sentosa Cove.

Some bungalow owners are now asking $1,800 to $2,000 psf when some freehold good-class bungalows sell for only half that price.

 

Source: The Straits Times 6 Dec 07

China acts to rein in prices and avert asset bubble

High-level meeting decides to shift monetary policy from ‘prudent’ to ‘tight’ next year

IN BEIJING – CHINA moved to cool its sizzling economy and rein in rising prices when it said yesterday that it would shift its monetary policy from ‘prudent” to ‘tight’ next year.

China’s leaders made the announcement at the close of an annual Communist Party economic conference attended by President Hu Jintao, Premier Wen Jiabao and others.

The policy for the coming year was outlined amid fears that food- and fuel-price hikes are threatening social stability across the country.

The size of loans and frequency of credit extension would be ’strictly controlled’ through ‘various monetary instruments’, concluded the three-day Central Economic Work Conference.

No details were given by official state media, but analysts predicted that these controls would come in the form of a sixth interest-rate hike and yet another raising of the minimum reserve requirement for banks, which would reduce the amount available for lending.

The announcement yesterday showed the government was paying ‘a lot of attention’ to two issues – inflation and the bubble in asset prices, according to a Beijing-based economist with the Chinese Academy of Social Sciences.

‘This really is extremely important,’ Mr Zhang Ming was quoted as saying by Agence France-Presse.

China’s economy is expected to grow by 11.5 per cent this year, with a government think tank recently predicting just a marginal slowing next year to about 10.8 per cent.

The primary task of China’s economic policy next year is ‘to prevent the economy from becoming overheated and to guard against a shift from structural price rises to evident inflation’, said the official Xinhua news agency.

China’s red-hot economy is flush with excess cash, caused by factors such as China selling far more exports abroad than what it imports from the rest of the world.

By the end of October, money supply growth was 18.47 per cent, 1.53 percentage points higher than the 2006 end level.

Beijing is worried at how having more money in the system is driving up housing and consumer prices.

But it had been reluctant to put too much of a break on lending and investment for fear of slowing down economic growth and employment.

The new attempt to tighten what has been a ‘prudent’ monetary policy for the past 10 years, is an acknowledgement that existing attempts at regulating money supply have not worked and that inflation is getting more pervasive, analysts told The Straits Times.

‘The real wake-up call is the persistence of inflation. The fact that it has spread from food prices to other parts of the economy has got the leadership very worried,’ said Beijing University finance professor Michael Pettis.

Alarm bells were set off when the country’s consumer price index (CPI) rose a decade-high 6.5 per cent in October, well above the government’s target of 3 per cent.

In recent days, food and fuel price hikes have pushed workers to go on strike in various cities across China.

The latest was a strike by taxi drivers yesterday in the north-eastern city of Harbin.

Previous bids to control the excess liquidity in the system have seen China’s central bank’s interest rates being hiked five times this year, bringing the benchmark rate on one-year loans to the current 7.29 per cent.

This year alone, it has raised banks’ reserve requirements nine times.

To further tighten money supply, analysts say Beijing is also likely to impose quarterly lending quotas on banks – instead of the usual annual quotas – and will enforce them more strictly.

 

Source: The Straits Times 6 Dec 07

China developer acquiring Spirit World

GUANGZHOU property developer China Yuanbang Property Holdings is acquiring Spirit World Holdings, one of the joint venture partners of its Aqua Lake Grand City project in Nanchang City, Hongjiaozhou for 200 million yuan (S$39 million).

On completion of the proposed acquisition, Spirit World will become an indirect wholly owned subsidiary of the group, which will in turn indirectly hold a 51 per cent stake in New Zhong Yan (Nanchang) Real Estate Development. The latter is another joint venture partner in the Aqua Lake development and holds the development site area of 193,380 square metres, valued at over 400 million yuan.

‘We have confidence in the property market of Nanchang which is growing rapidly. This acquisition will not only enable the group to enjoy more profitability from the sale of properties of the Nanchang project, but also allow the group to reap the gain on the appreciation of the underlying value of the development site,’ said China Yuanbang Property executive chairman Chen Jianfeng yesterday. ‘Furthermore, we will have more control over the cost and quality of the construction,’ he added.

The Aqua Lake Grand City is a mixed property development for the group. It is to be developed in three phases.

The group held its first pre-sales of residential units last month. This saw a strong take-up rate of about 85 per cent with an average selling price of 5,300 yuan per square metre, which is a third higher than the original target selling price of 4,000 yuan.

 

Source: Business Times 27 Nov 07

Topshop to open China store next year

(SHANGHAI) British fashion retailer Topshop plans to open its first China store early next year, following rivals such as Inditex’s Zara and Hennes & Mauritz AB in setting up shop in the world’s fastest growing major economy, sources familiar with the situation said yesterday.

Topshop had signed a deal to rent space in the Shanghai Superbrand Mall in the city’s financial district, said the sources, who declined to be identified.

The mall, in which Zara and H&M already have shops, is managed by a property arm of Charoen Pokphand group, Thailand’s biggest agricultural business conglomerate. ‘Topshop is definitely not coming to China for just one store,’ one of the sources said.

‘It is also looking at many other Chinese cities, such as Beijing and Hong Kong.’ Other sources confirmed Topshop was in talks with several property developers in the former British colony of Hong Kong in the hope of launching Topshop stores in the city next year. Topshop could not immediately be reached for comment.

China’s fashion retail market is booming alongside changing lifestyles and income growth. Retail sales in general are expected to grow about 15 per cent in 2007, analysts have said.

 

Source: Reuters (Business Times 23 Nov 07)

China needs to levy property tax: official

(BEIJING) China should levy a general property tax to discourage speculation and rein in runaway real estate prices, according to a member of the central bank’s monetary policy committee.

Fan Gang’s comments in the latest issue of a Chinese Academy of Social Sciences magazine echo concerns voiced this week by Premier Wen Jiabao that China’s soaring housing market must be brought under control.

‘Realty investors don’t care whether their houses can be rented out or not,’ Mr Fan said in an interview. ‘If a continual and incremental tax is imposed on real estate, investment in the sector will cool down.’

Mr Fan, one of China’s best-known economists, has previously called for an annual tax on homeowners based on the value of their property but had previously said that technical obstacles stood in the way. His latest comments described the reforms as urgent.

‘Demand will continue to expand unchecked if realty investors are not required to pay anything to compensate for the housing price hike,’ he said.

China has adopted a number of measures to cool the real estate sector, such as increasing capital gains taxes on property and tightening land-use rules.

But property prices have resumed their surge, up 9.5 per cent year-on-year in October and even more in major cities, after briefly calming earlier in the year.

Mr Fan, who is also director of the National Institute of Economic Research, added that authorities must crack down on insider trading and illegal loans in the stock markets, or ‘the consequences will be unthinkable’.

However, he was optimistic about China’s potential for stable growth at around 11 per cent a year, saying that the country would continue to benefit from low labour costs, a high savings rate, capital inflows and advances in education and technology.

The challenge, he said, was for China to fix its economic problems from its current position of strength, so that it would be better able to withstand international financial crises.

He also said that the profitability of Chinese businesses was exaggerated because of artificially low resource prices, tiny social security outlays and lax environmental rules.

 

Source: Reuters (Business Times 22 Nov 07)

Nina’s estate set to go to administrators

Feng shui expert files application to preserve assets of HK$100b estate

IN HONG KONG

THE stage is set in Hong Kong for a feisty probate battle over the fortune of Nina Wang Kum Yu-sum, once Asia’s richest woman, and control of the sprawling Chinachem property empire.

The estate of Ms Wang, who died in April this year, is likely to be put in the hands of court-appointed administrators pending the outcome of what is expected to be a protracted legal fight over her estimated HK$100 billion (S$18.6 billion) fortune.

Feng shui expert and businessman Tony Chan Chun-chuen claims to be the sole beneficiary of the deceased tycoon’s estate and is set to square off with the Chinachem Charitable Foundation, which claims a 2002 will left everything in its name. The foundation is headed by family members of Ms Wang.

This week, Mr Chan made a bid to have independent administrators appointed to preserve the assets of Ms Wang’s estate. The application has been adjourned until Dec 10.

The administrators will establish who owns the shares in the Chinachem companies – one of Hong Kong’s biggest private developers – as well as other types of assets, according to John Lees, director of forensic accountant and corporate restructuring firm John Lees & Associates.

‘They would look after these to make sure the right people are dealing with them … both sides would be putting together a set of orders the court would have to approve,’ he said. Administrators may force the company to put further developments on hold pending the outcome of the court case.

This is not the first time that the assets of Chinachem have come under the spotlight. The group of companies was at the heart of a protracted legal battle between Ms Wang and her father-in-law, following the death of Chinachem founder Teddy Wang The-huei.

Teddy Wang vanished in 1990 at the hands of kidnappers. For the next nine years, Ms Wang insisted that her husband was still alive, until a court finally declared him dead in 1999 upon the wishes of his father, Wang Dinshin.

For the next eight years, Ms Wang and her father-in-law waged a bitter war over the estate of Teddy Wang. Nina Wang stayed at the helm of Chinachem throughout, but was accused by her father-in-law of faking a will to inherit his son’s estate. The will – signed ‘one life, one love’ – contradicted another that the tycoon had made in 1968 which would see his fortune bequeathed to his father.

During the trial, it emerged that the elder Wang had told his son that Ms Wang was having an affair. The court heard that Teddy was so angered by the infidelity that he had made the 1968 will, rescinding an earlier one that split his estate equally between his father and wife.

Although the High Court sided with the father-in-law, Ms Wang won at the top court, also stymieing any criminal proceedings against her. The total legal bill came to HK$562 million, but that was not an end to the affair: it had long been suspected that there were other individuals financing Mr Wang, and he defied a court order to reveal their identities.

Chinese press reports named various property personalities as being behind the litigation. Had Ms Wang lost, the Chinachem property fortune could have ended up in the hands of her rivals.

The elderly Mr Wang described these individuals in the Chinese-language press as ’sympathetic and righteous lenders’, but refused to reveal their identities. In Hong Kong, third parties are barred from funding litigation on another’s behalf.

Ms Wang was ranked as the 154th richest person in the world by Forbes magazine last year. The litigation over her estate has left most of Hong Kong mystified: she battled for so long over her husband’s fortune that many are baffled as to how she herself could have had anything but a watertight legacy.

 

Source: Business Times 21 Nov 07

Keppel Land to develop big housing project in Shanghai

It buys company with 26.4ha Nanhui site for $13.6m

KEPPEL Land is embarking on a large-scale residential project in Shanghai.

The Singapore-based developer announced yesterday that it has, through two subsidiaries, acquired full ownership of Shanghai Hongda Property Development for about $13.6 million.

Shanghai Hongda owns a 26.4-hectare residential site in Xinchang Town, in Nanhui District in south-eastern Shanghai. With the acquisition, Keppel Land said it is ‘poised to capitalise on the urban expansion and growing real estate market of Shanghai’. Keppel Land already has three residential developments in Shanghai.

‘Shanghai is positioned as a global financial hub,’ said Ang Wee Gee, Keppel Land’s director of regional investments. ‘Its property market is poised for continuing good prospects.’

Nanhui District has in recent years received significant attention from the government, owing to its strategic location adjacent to China’s largest port facility, the Yangshan Deep Water Port off Hangzhou Bay.

The Shanghai government has pumped money into infrastructure and real estate development in the district. It also has plans to develop the south-eastern tip of Nanhui District into a harbour city to support the activities of Yangshan Port and trade-related industries and services, said Keppel Land. The harbour city will house 800,000 people and several industrial parks by 2020.

‘Earmarked as one of key housing zones in Shanghai, Nanhui District has taken off rapidly with a surge of public and private real estate investments,’ Mr Ang said. ‘Our latest project is well-timed to capture Nanhui’s growing housing demand, which is expected to be underpinned by strong owner-occupiers’ demand over the next few years.’

According to Keppel Land, more residents are expected to be drawn into Nanhui District by increasing economic activities and opportunities pouring into the area.

The project in Nanhui District is aimed at middle-income buyers. Keppel plans to build it in phases over five years into a mixed residential enclave of 3,000 homes ranging from terrace houses to low and mid-rise apartment blocks. The development will include a club house and retail shops.

‘Keppel Land has been present in Shanghai for more than a decade, during which we have established ourselves as a quality developer with keen market knowledge and strong business networks,’ Mr Ang said.

‘We are confident that with our valuable experience and expertise, Keppel Land is well-placed to identify and tap new opportunities, and to meet the demand for quality homes in this market.’

Keppel Land said the latest acquisition is not expected to have any significant impact on its net tangible asset and earnings per share for the financial year ending Dec 31, 2007.

 

Source: Business Times 16 Nov 07

China’s housing price inflation hits new high

(BEIJING) Housing price inflation in China hit a new monthly high of 9.5 per cent in October despite government efforts to cool the boom, a state news agency reported yesterday.

The October rate was up 0.6 percentage point from September’s housing price inflation, the Xinhua News Agency said, citing the government’s National Bureau of Statistics. The communist government is trying to curb a sharp rise in real estate prices and guarantee adequate housing for the poor.

Regulators have raised interest rates, ordered developers to build more small, low-cost homes and imposed curbs on the purchase of second homes and foreign investment in real estate.

The monthly rise in housing prices in 70 Chinese cities ‘hit a new high despite the government’s efforts to curb surging property prices’, Xinhua said.

The price rise has been fuelled by an export boom that has sent cash flooding through China’s economy.

Chinese leaders worry that a frenzy of building could ignite a debt crisis if new shopping malls, luxury apartments and other projects fail to attract buyers and developers default on bank loans.

They also worry about the possible political fallout if housing prices rise beyond the reach of hundreds of millions of Chinese who have been left behind by the country’s boom.

Prices of luxury homes rose fastest in October, climbing by 12.3 per cent, Xinhua said. It said prices of low-cost housing rose 3.3 per cent. In Beijing, prices rose 17.8 per cent, Xinhua said.

The highest rate reported was 19.1 per cent in Ningbo, a booming port south of Shanghai in a major exporting region.

 

Source: AP (Business Times 16 Nov 07)

3 Chinese property firms plan to tap US$4b in HK floats

Investor interest high despite moves to cool market

 

(HONG KONG) Three big Chinese property firms plan to hit the Hong Kong market next year to raise a combined US$4 billion, tapping heavy investor demand despite government tightening measures aimed at cooling a scorching property sector.

 

Hengda Real Estate Group aims to raise US$1 billion to US$2 billion in a Hong Kong initial public offering, while fellow Guangzhou-based developer Star River Group plans to raise between US$800 million and US$1 billion, sources familiar with the deals said on Wednesday. Both plan listings in the first half of 2008.

Longhu Real Estate, a property firm based in the western Chinese city of Chongqing, also plans to raise more than US$1 billion in a Hong Kong IPO next year, sources said previously, with Morgan Stanley sponsoring the deal.

‘The flow of Chinese IPOs in Hong Kong will remain strong next year, especially for the property market,’ one of the sources said. A glut of IPOs is slated to list in Hong Kong by the end of this year, including Chinese oil rig manufacturer Honghua Group, which aims to raise about US$500 million and will soon seek approval from the Hong Kong Stock Exchange for its listing sponsored by Morgan Stanley, sources said.

With the Chinese government trying to cool the booming construction sector and banks restricting loans for land purchases, property firms have been tapping the public capital markets in order to raise funds.

So far this year, some 10 mainland property firms have raised about US$8 billion in Hong Kong IPOs. The central bank expects Chinese gross domestic product to grow by 11.6 per cent this year, and many fund managers favour property as a way to hedge against inflation, which reached a nearly 11- year high in October at 6.5 per cent.

‘There are already plenty of choices among listed property companies. Investors are looking for toptier property firms with large land banks,’ said Michael Chung, a fund manager at Iventure Investment Management Ltd.

Hengda has tapped Credit Suisse, Goldman Sachs and Merrill Lynch to sponsor its IPO, while Star River has appointed UBS and Morgan Stanley. In January, Merrill Lynch, Deutsche Bank and Singapore investment company Temasek Holdings invested US$400 million in Hengda, according to the official Shanghai Securities News. As for Star River, its properties located in Beijing and Guangzhou are focused on high-end residential customers.

Although the government unveiled further cooling measures in September, including a ban on lending to developers found to be hoarding land and raising down payment requirements on second homes, IPOs by property firms have attracted strong demand.

The October IPO by Beijing-based Soho China Ltd, which raised US$1.65 billion, was 169 times covered in its retail portion. Its shares are up 24 per cent since listing. A US$1.66 billion initial public offering in April by Country Garden Holdings Co, the biggest by a Chinese developer, was more than 270 times subscribed by retail investors, and its shares have more than doubled from its IPO price.

 

Source: Reuters (Business Times 16 Nov 07)

Housing prices in China shoot up

BEIJING – CHINA‘S housing prices rose at their fastest rate yet last month despite government efforts to cool the boom and ensure adequate supplies of homes for the poor, according to data reported yesterday.

 

The sharp gains of 9.5 per cent have inflated assets of Chinese who already own property, helping to produce dozens of new billionaires, but strained the ability of ordinary families to buy homes.

 

‘Housing prices are higher and higher and beyond belief,’ said Ms Zheng Jinping, a 23-year-old employee of a Beijing construction company.

 Ms Zheng said she and her fiance looked for a home this year but gave up when they found nothing affordable. ‘We will wait a year to see whether prices drop. But if they don’t, we will have no choice but to buy. We are getting married and we need a place to live,’ she said.

Last month’s gain was up from September’s 8.9 per cent rise, according to China’s main planning agency, the National Development and Reform Commission (NDRC). The official Xinhua News Agency said the October rate was the highest on record.

 Rising prices are fuelling a building frenzy, turning Beijing and other Chinese cities into forests of cranes as developers put up new apartments, shopping malls and office towers.

Housing prices in Beijing soared 17.8 per cent, figures showed.

 China’s leaders worry about the social impact if housing prices rise out of reach for hundreds of millions of Chinese who have been left behind by the country’s boom. Poor families are already struggling with a spike in inflation which saw food prices climb 17.6 per cent last month, compared with the same month last year.

At the same time, the number of mainland Chinese billionaires rose from 15 last year to 66 this year, many on the strength of property investments, according to business magazine Forbes.

Ms Li Ran, a 25-year-old employee of a state company, and her parents are looking for a two-bedroom apartment in Beijing.

 

They have 400,000 yuan (S$78,000) – a substantial sum in China. But even if they borrow another 250,000 yuan, they will have to settle for a place in the distant suburbs beyond the Fifth Ring Road which circles the capital, she said. ‘Incomes keep increasing, but they lag far behind housing prices. Still, people want to buy.’

 

As to whether the government can restrain prices, Ms Li said, ‘I don’t think the situation will change in the next 10 years. The trend is irreversible.’

 

Prices of luxury homes rose fastest last month, climbing 12.3 per cent, the NDRC said on its website, citing a survey of prices in 70 cities. It said prices of low-cost housing rose 3.3 per cent. The highest rate reported was 19.1 per cent in Ningbo, a booming port south of Shanghai in a major exporting region.

Real estate agent Ji Donghai said he has seen the volume of properties changing hands with ease lately, possibly due to the higher prices. ‘Some of my customers choose to rent a place and wait for a while,’ said Mr Ji, who works for the Beijing Di Jia agency. ‘But some other customers still choose to buy. They see the rising price, and they don’t think it is likely to fall.’

 

Source: ASSOCIATED PRESS (The Straits Times 16 Nov 07)

 

China house prices rise fastest in two years

Prices in 70 major cities surge 9.5% in Oct; property buys up as inflation soars

(HONG KONG) China’s house prices rose in October at the fastest pace since 2005 as inflation outpaced returns on bank deposits, encouraging households to invest in property.

Prices in 70 major cities jumped 9.5 per cent from a year earlier after gaining 8.9 per cent in September, the National Development and Reform Commission said yesterday on its web site. That was the biggest gain since records began in August 2005. Values climbed 1.6 per cent from September.

The acceleration is fuelled by the cash flood from China’s trade surplus, a record US$27 billion in October, prompting concerns about a possible property bubble.

China in September raised interest rates on some mortgages and increased minimum down payments to curb real estate speculation.

‘Price gains are understandable because the strong demand is still out there,’ said Liu Xihui, a Shenzhen-based analyst with Ping An Securities Co. ‘The reason prices are still accelerating is probably because September’s tightening measures haven’t yet had an effect.’

Prices soared 19.5 per cent in October from a year earlier in Shenzhen and 15.1 per cent in Beijing,

the commission said. New commercial housing valuations rose 10.6 per cent from a year earlier and second-hand prices increased by 8.7 per cent, it said.

Measures introduced by China on Sept 27 to damp property speculation included raising downpayments to 40 per cent from 30 per cent for housing loans, and to half a property’s value for commercial real estate.

The steps will slow property price increases in the balance of the year by crimping buying for investment purposes, said Ping An Securities’ Liu. Housing sold to buyers hoping to sell at anticipated higher prices accounts for a ‘big part’ of total sales, he said.

September’s measures came after new taxes, higher mortgage rates and downpayment ratios imposed since 2005 failed to cool the market. Investment in real estate development jumped 30.3 per cent in the first nine months of 2007, 6 percentage points faster than a year earlier.

China’s consumer prices rose 6.5 per cent last month from a year earlier, matching the decade high in August, as food costs surged. The benchmark one-year deposit rate is 3.87 per cent.

China has this year raised interest rates five times and ordered lenders on nine occasions to set aside larger reserves to curb inflation and contain bubbles in the property and stock markets.

 

Source: Bloomberg (Business Times 15 Nov 07)

China developer plans 3.9b yuan rights issue

(SHANGHAI) Shanghai Zhangjiang Hi-Tech Park Development Company said yesterday that it plans to raise 3.9 billion yuan (S$760 million) through a rights offer.

The developer of Shanghai’s major high-tech industrial park will use the proceeds from the rights issue to buy assets from its parent, develop property projects and supplement its working capital, the company said in a statement.

The company plans to make a 2.4-for-10 or 2.9-for-10 rights offer, based on the company’s total share capital of 1.215 billion shares at the end of September, it said.

The rights will be issued at a discount to its stock price, it said.

It added that the plan will require approvals from its shareholders as well as regulators.

Shares of the Shanghai company last traded at 21.98 yuan each.

This is a whopping rise of 335 per cent over the past 12 months.

 

Source: Reuters (Business Times 15 Nov 07)

JLL sees Asia as safe haven amid sub-prime debris

Region could benefit as investors reallocate funds from US, Europe

(LONDON) Asia provides a ’safe haven’ for property investors as returns decline on US and European assets because of sub-prime mortgage losses, said commercial real estate broker Jones Lang LaSalle.

‘The region could be a beneficiary of the fallout as investors reallocate funds from the US and Europe towards Asia-Pacific in search of higher growth opportunities on a risk-adjusted basis,’ Jane Murray, Asia-Pacific head of research at Jones Lang LaSalle, said yesterday in a report.

The world’s biggest banks and securities firms wrote down US$45 billion of assets this year and cut 10,000 jobs because of the collapse of the market for mortgages made to borrowers with poor credit.

Commercial real estate transactions fell in the UK and the US after defaults on subprime pushed up borrowing costs, creating turmoil in financial markets.

Global direct real estate investment in Asia gained 14 per cent to US$54 billion in the first half of the year, compared with the year-earlier period, Jones Lang LaSalle said. Asian deals are about a third of the volumes in the Americas or Europe.

‘Although regional investment volumes are still a comparatively low proportion of global direct property investment, interest levels are very high and we foresee the continuation of rapid growth in volumes,’ said Ms Murray.

Japan remained the dominant market in Asia for international investors in the first half, accounting for more than half of investment in the region, the broker said.

Capital values gained 8.7 per cent in Japan during the quarter to 3.96 million yen (S$52,075) per square metre.

Goldman Sachs Group bought the building that houses Tiffany & Co’s flagship store in Tokyo in August for 37 billion yen, or about 54.45 million yen per square metre, the highest price paid since the burst of the bubble economy in the early 1990s, according to Jones Lang LaSalle.

Average monthly rents for grade A office buildings advanced 3 per cent from the second quarter to 54,882 yen per tsubo (US$150 per square metre), the 13th-straight quarter of gains, Jones Lang LaSalle said.

Grade A office buildings are sites with total leasable floor area of more than 10,000 square metres and more than 800 square metres per floor, according to Jones Lang LaSalle.

The buildings should be no older than 25 years.

 

Source: Bloomberg (Business Times 14 Nov 07)

HK property sector set to grow up to 30% in next 12 months

Flow of cash into city and cheaper financing options fuelling growth

IN HONG KONG

HONG Kong’s property market is tipped to see growth of up to 30 per cent over the next 12 months amid a flow of hot money into the city and a favourable interest rate environment.

This week saw HSBC cut its prime lending rate by a further 25 basis points to 7 per cent, following a rate cut only last week on the heels of one in the US. Other banks are expected to follow suit, fuelling a mortgage war among banks in the city.

As well as cheaper financing options for home buyers, the property sector is benefiting from a flow of cash into Hong Kong, in part due to an expectation that China will soon relax restrictions on capital inflows into the city.

This is expected to bring significant gains to Hong Kong’s stock market, which has already risen 55 per cent over the past two months in anticipation of fresh fund flows by mainland investors.

This week, Standard & Poor’s Equity Research outlined its bullish outlook on the residential property sector, reflecting what it sees as a return of confidence to the sector.

It cited recent record prices for luxury apartments, increased volume in residential transactions and the higher than expected bids for government land at auctions as indicators of confidence among developers and buyers.

The research arm of S&P said it expects a rise of 20 per cent to 25 per cent in the prices of residential properties over the next 12 months, as prices in large and small residential units remain well below 1997 prices.

But Colliers International director Ricky Poon believes property prices could increase by as much as 30 per cent.

‘The market is very different from 1997,’ he said. ‘There’s not too many people speculating.

‘Also, some people have been playing the stock market and have come out – and are investing in the property market.’

He said he had recently revised upwards projections of a 15-20 per cent rise over the next 12 months.

This would narrow the gap between the luxury sector, which has been powering ahead over the past few years, and the mass residential sector, which had been lagging.

‘The luxury sector has been going up a lot over the past two years,’ Mr Poon said. ‘It has even gone up by 10 per cent just in the past few weeks.

‘Now I think the market is moving to the mass residential sector – so the gap will be narrowing.’

Adding to the ‘feel good’ factor in the property sector were figures this week from the Hong Kong Monetary Authority on the number of residential mortgage loans in negative equity – where the property is worth less than the sum owing.

The number of these mortgages fell by about 1,200 cases to 3,500 cases in the three months to the end of September. They had an aggregate value of HK$6 billion (S$1.1 billion).

It represents a 97 per cent drop from the peak of the negative equity phenomenon which was in June 2003, just as Hong Kong was recovering from the Sars outbreak and an endemic slump in property values since 1997.

 

Source: Business Times 10 Nov 07

Park Hotel Group opens Kunming hotel today

SINGAPORE-BASED Park Hotel Group has added the five-star Harbour Plaza hotel in Kunming, China to its portfolio.

The hotel, one of the best in Kunming, has been renamed Grand Park Hotel Kunming and begins operations today. It has a total of 300 rooms and suites, all with broadband access.

Facilities at the hotel, which is five minutes from the city centre and a 20-minute drive to the airport, include a gymnasium, sauna, spa and outdoor swimming pool. It also has a revolving restaurant on the 21st floor with a clear view of the famous Green Lake, a Kunming landmark.

Park Hotel Group director Allen Law said: ‘The acquisition of Grand Park Hotel Kunming is a strategic move. It marks the start of our operations in China and affirms our goal of providing luxurious hospitality in the Asia-Pacific.’

Park Hotel Group yesterday also announced the appointment of Michael Lew Weng Sung as the Kunming hotel’s general manager. He will oversee the hotel’s operations and development.

Park Hotel Group will host a reception tomorrow to celebrate Grand Park Hotel Kunming’s entry to the group. Besides China, the group has hotels in Singapore and Hong Kong. Its Singapore hotels include the Grand Plaza Park Hotel City Hall and Park Hotel Orchard. In Hong Kong, it runs the Park Hotel Hong Kong.

 

Source: Business Times 1 Nov 07

Global property investment expected to fall

Mortgage defaults in US may prompt lenders to tighten credit, says JLL

(TOKYO) Global direct real estate investment may fall this year as concerns about defaults on US mortgages prompted lenders to tighten credit, said Jones Lang LaSalle Inc, the world’s second-largest commercial real estate broker.

Asia may be the only market to experience an increase in investment in the second half of this year, Jane Murray, Asia-Pacific head of research at Jones Lang LaSalle, said in Tokyo yesterday. Global direct property investment rose 41 per cent in 2006 to US$699 billion, advancing for a third-straight year.

‘The highly leveraged players who were very active earlier in the year are certainly sitting on the sidelines at the moment,’ Ms Murray said.

The four-year boom in real estate is threatened after the US housing slump raised concerns about the value of mortgages and bonds linked to those loans. Investors are finding it harder to borrow money when they want to fund property acquisitions.

Japan, Singapore, China and India are among the markets offering the best opportunities for investors, according to Jones Lang LaSalle research.

Grade A office rents in Japan have gained 80 per cent in the past three years and have more than doubled in Singapore, Ms Murray said. Grade A buildings are no more than 25 years old, with total leasable floor area of more than 10,000 square metres and more than 800 square metres a floor, according to Jones Lang LaSalle.

Japan features strong economic growth in a large market and is the only country where returns on office buildings exceed local interest rates, also known as a positive yield spread, Ms Murray said.

Morgan Stanley raised a record US$8 billion for a real estate investment fund in June. In April the firm agreed to buy 13 Japanese hotels from All Nippon Airways in the country’s biggest real estate deal.

Japan offers a positive yield spread of 1.56 per cent, compared with negative spreads in other major cities including London, Paris, Frankfurt and New York, said Takeshi Akagi, local director in Japan for Jones Lang LaSalle.

Investment in China rose 23 per cent in the first half of the year even after the government sought to curb property investment to cool gains in housing prices. India, where more than half the population is under the age of 25, doesn’t have enough offices, shops and houses to meet demand, Ms Murray said.

‘It will require major additions to the stock base across every sector over the coming years to accommodate its rapidly growing services sector and the increasing wealth of its population,’ Ms Murray said.

‘When the Indian government begins to deregulate investment for foreign players, we will see a flood of money pouring into that market.’

 

Source: Bloomberg (Business Times 25 Oct 07)

Second busiest port: Shanghai may replace HK

Its box volume likely to top 25.5m TEUs in 2007, next only to S’pore’s 27.6m

(SHANGHAI) Chinese city Shanghai is expected to overtake Hong Kong as the world’s second-busiest container port this year, helped by rising throughput at the multibillion-dollar Yangshan deep-water port, a senior port official said yesterday.

The city port’s container volume is expected to top 25.5 million TEUs (twenty- foot equivalent units) this year, lagging only Singapore, whose volume is estimated to be 27.6 million TEUs this year, Xu Peixing, director-general of Shanghai Port Administration, told Reuters on the sidelines of an industry event.

He did not give a full-year estimation for Hong Kong, which moved 17.7 million TEUs of goods in the first nine months, according to statistics provided by the Hong Kong Port Development Council.

Shanghai International Port (Group) Co, China’s biggest port operator, controls the city port’s major assets.

‘Yangshan port has played a big role in boosting Shanghai’s container volume,’ Mr Xu said. ‘Its full-year container volume is estimated at 5.8 million TEUs.’

Yangshan’s capacity was at 4.3 million TEUs as of the end of 2006 when the first two phases were completed.

Construction of Phase 3 of the deep-water port is going smoothly, with four additional berths to be in place by the end of this year and three more by the end of 2008, increasing its total number of berths to 16, Mr Xu said.

He added that Phase 3, which would push up the port’s handling capacity to 15 million TEUs by 2012, remained open to outside capital but the name list of foreign investors has yet to be finalised.

He declined to name the potential investors. But local media has named Singapore’s PSA International and French shipping company CMA CGMere as potential candidates, along with local players China Ocean Shipping Group and China Shipping (Group).

 

Source: Reuters (Business Times 25 Oct 07)

High rents drive big firms out of HK’s Central

DBS Bank (HK) moves to Quarry Bay; Morgan Stanley, Kowloon

IN HONG KONG

BLUECHIP tenants are retreating from Hong Kong’s central business district as rents climb beyond reach.

The latest move away from the high-rent Central area is by lender DBS Bank (Hong Kong), which has just leased more than 220,000 square feet of office space in the Quarry Bay district, a 30-minute subway ride from Central.

The bank signed a 10-year lease for 11 floors at One Island East, a Grade A office block developed by Swire Properties. Relocation from DBS’s existing Central and Wanchai locations will be in phases, to be completed by the end of 2009.

Investment bank Morgan Stanley recently turned heads with its decision to relocate from Exchange Square in Central to the International Commerce Centre across the harbour in Kowloon.

It is leasing 10 floors for its Asia-Pacific headquarters, double the existing 150,000 sq ft it occupies in Central.

The decisions to move come as Central continues to command exorbitant rents, due to hot demand and tight supply. Rents in the area have gone up by more than four times since 2003.

The iconic International Finance Centre 2 building, which dominates the city’s skyline, is now fetching a record HK $160 (S$30) per sq ft (psf). When the building opened in 2003, rents were just HK$20 psf.

The shift to cheaper office space also reflects a demand for more space as many companies have benefited from a capital markets boom and seek to expand.

Simon Lo Wing-fai, director of research and consultancy for Colliers International, estimated that rental growth in Central will be up to 20 per cent in 2007.

But he expected the monthly figure to start falling if companies move out in search of cheaper rents.

‘Rental growth is tapering off quite substantially, especially after Morgan Stanley decided to move,’ he said.

‘Current rental growth is about one per cent a month. Next year, there might be a downwards adjustment.’

With no new supply coming online in Central, numerous building owners are preparing to renovate to expand their space and lure new tenants.

According to property firm Savills, Grade A office buildings in Central have risen for the past 15 consecutive quarters, surging 6 per cent in the second quarter of 2007.

However, new supply such as One Island East in Quarry Bay and some key buildings in Kowloon will continue to put pressure on prices, Savills reckoned. The One Island East project takes up a massive 1.5 million sq ft and has 70 storeys.

New developments in Kowloon, such as One Kowloon and Enterprise Square, are beginning to attract a critical mass of tenants. Both have hit an occupancy level of 70 per cent.

Meanwhile, other financial institutions are moving to the periphery of Central. China Construction Bank, for example, has taken up around 17,000 sq ft of Two Pacific Place in the nearby Admiralty district, according to Savills.

Sun Hung Kai Securities has likewise leased space in Admiralty Grade A buildings.

The overall office space vacancy rate in Hong Kong remains low, at just 5.3 per cent in July.

 

Source: Business Times 22 Oct 07

CapitaLand buys China site for $203m

CAPITALAND has secured a piece of prime commercial land in Hangzhou, China for $202.8 million.

The 40,355 sq m site in Qianjiang New Town was acquired through a government land tender.

The price tag works out to about $715 per sq m per plot ratio.

CapitaLand plans to build a mixed development on the site under the Raffles City brand – its fourth in China.

To be called Raffles City Hangzhou, the development will comprise a Grade A office tower, a retail mall, a fivestar hotel and residences. It is expected to be completed by 2011.

The site is located at the heart of the new central business district in Hangzhou and will be linked to a proposed subway interchange to be completed in 2010.

With the relocation of the municipal government office to Qianjiang New Town, the district housing Raffles City Hangzhou is expected to be transformed into a bustling commercial area with quality offices, high-end residences and trendy retail shops, as well as dining and entertainment hubs.

CapitaLand chief executive Liew Mun Leong said the group is confident that Raffles City Hangzhou will become a new landmark in the city.

CapitaLand’s three other Raffles City projects in China are in Beijing, Shanghai and Chengdu.

 

Source: The Straits Times 22 Oct 07

CapitaLand to build sixth Raffles City in Hangzhou

It has acquired a 40,355 sq m site for $202.8m

CAPITALAND has acquired a site in the Chinese city of Hangzhou for $202.8 million and says that it will be the location for its sixth Raffles City after those in Singapore, Shanghai, Beijing, Chengdu and Bahrain.

The 40,355 sq m Hangzhou site is in Qianjiang New Town, Jianggan District, and has a gross floor area of 283,568 sq m. The price works out to be about $715 per sq m per plot ratio.

This will be CapitaLand’s fourth Raffles City in China. The development will comprise a Grade-A office tower, a retail mall, a five-star hotel as well as residential units, and is expected to be completed by 2011.

On the expansion of the Raffles City brand, CapitaLand Group CEO and president Liew Mun Leong said: ‘With growing interests from many countries to have CapitaLand develop a Raffles City in their respective cities, we aim to have a total of 10 Raffles City developments within the next five years.’

CapitaLand is building Raffles City Beijing, targeted for completion in 2008. It is also developing Raffles City Bahrain and has acquired a prime commercial site in Chengdu, the provincial capital of Sichuan, to build Raffles City Chengdu. Both will be completed in phases from 2010.

Mr Liew said: ‘Given the site’s excellent location, we are confident Raffles City Hangzhou will become a new landmark in the city, attracting consumers, tourists and business travellers from all over China and beyond.’

He added: ‘Last year, we also acquired our first residential site in Hangzhou to build about 1,200 homes. We will look for further opportunities in China to expand our footprint into cities where there are strong real estate opportunities supported by urbanisation and rising income levels.’

Hangzhou is a two-hour, 180 km drive from Shanghai and was ranked by Forbes magazine in 2004, 2005 and 2006 as the top city in China for business.

CapitaLand believes that with the relocation of the municipal government office to Qianjiang New Town, the construction of several subway linkages and the establishment of a new cultural and civic centre, this area of Hangzhou will be transformed into a bustling commercial district.

The Raffles City Hangzhou site will be linked to a proposed subway interchange serviced by Metro Line 1, to be completed in 2010. Metro Line 1 connects directly to the high-speed Maglev train service, which is expected to start operating between Hangzhou and Shanghai by 2010.

 

Source: Business Times 20 Oct 07

Luxury apartment sold for record HK$109m

New 3,205 sqft flat cost HK$34,000 psf: report

(HONG KONG) A new Hong Kong apartment has sold for a record US$14.1 million, a report said yesterday, as the city’s booming market for luxury homes continues to strengthen.

The 3,205 square foot duplex apartment on Hong Kong island fetched HK$109 million (S$20.56 million), or HK $34,000 per square foot, according to a report in the South China Morning Post.

The sale broke the record of HK$33,300 per square foot for a flat in the distinctive The Arch development on the opposite side of Victoria Harbour, which was sold in March.

The apartment, in the four-tower The Legend development, features a rooftop swimming pool with gold-plated fixtures and a view of the famous harbour, the paper said, quoting Louis Ho, property director at the sales agent, Centaline.

‘These features attracted the buyer to pay an aggressive price for the unit,’ he said.

The record is not expected to last long as the developer, Cheung Kong (Holdings), part of Asia’s richest man Li Ka-Shing’s business empire, plans to raise prices for the remaining duplexes in the building, the report said.

Earlier in the week, a prime piece of development land in Hong Kong was sold for HK$5.71 billion, smashing analysts’ expectations on the back of rising demand for luxury housing in the territory.

 

Source: AFP (Business Times 20 Oct 07)

Bubble fears growing with HK’s prolonged bull run

IN HONG KONG

AS Hong Kong’s market continues to enjoy a bull run that has seen its benchmark Hang Seng Index (HSI) surge by more than 40 per cent in just two months, fears of a bubble are beginning to seep in.

The HSI is trading at nearly 20 times earnings, with the H-share index at 31.2 times earnings – a reflection of a sturdy appetite for mainland focused firms.

Yesterday, the Hang Seng toyed with the 30,000 mark before falling in the afternoon. The blue-chip index closed at 28,954.55, down 586.23 points, having hit an intraday record earlier of 29,920.25.

Some, however, fear that valuations are overstretched, with an asset bubble forming. And as punters continue to wade into the boom story, they worry a serious correction could have a potent effect.

The bull run first started gathering pace on the heels of an Aug 20 announcement from Beijing that it would allow mainlanders to invest directly in Hong Kong stocks. This prompted an expectation of a fierce flow of cash from across the border.

‘The market has gone up further and faster than anyone could have believed, so people worry about a correction – because it’s gone up so sharply, it could be a big correction,’ says Howard Gorges, vicechairman of South China Brokerage. ‘But the fact is they are not so worried because the market keeps going up.’

Commentators have been sounding alarm bells especially because daily fluctuations seem to suggest greater participation by day traders, who stand to get their fingers burned.

‘That’s why you see the market fluctuate during the day – if there are a lot of day traders really trying to get the market right for a quick possible movement,’ explains Mr Gorges.

Hong Kong has had major bull runs in the past. However, Mr Gorges stressed that it has never been on this scale before. The addition of China- based investors is also differentiating this run from previous ones, he said.

‘Previously, it was just overseas and Hong Kong (investors),’ he said. ‘And overseas investors are also looking at emerging markets and the China story.’

He said the most likely blips on the horizon are possible measures by the mainland to cool its economy, which could dampen market enthusiasm. However, Mr Gorges hopes any correction will be a healthy one that slows the run down a bit. ‘But there are no rules,’ he stressed.

While some commentators have warned of a knock-on effect to other sectors of the economy should there be a major correction, the city is still showing strong fundamentals. Economic growth continues to be steady, while the property market is picking up pace and unemployment remains at historic lows.

This week, the property market received a boost from a land auction that saw two residential sites fetch prices well above market expectations. An Aberdeen site was sold to a consortium that included Sino Land and Nan Fung Properties for HK$5.71 billion (S$1.08 billion), more than double the opening bid of HK$2.5 billion. It was expected to fetch a maximum of HK$4.4 billion.

Another site on Lantau island sold for HK$482 million, more than 90 per cent higher than the reserve price. The market had expected it to fetch up to HK$300 million. Both sales reflect stellar demand for luxury sites as tight supply sends prices soaring.

 

Source: Business Times 17 Oct 07

China plans to launch Reits on Shanghai bourse

BEIJING – CHINA plans to launch real estate investment trusts (Reits) on the Shanghai Stock Exchange as part of a bid to provide more financial products for investors, a senior official said yesterday.

Mr Zhu Congjiu, the general manager of the Shanghai Stock Exchange, did not specify when the Reits would come to market.

But he told a financial forum that his office was planning to launch some Reit products to let more investors reap gains from China’s soaring property prices.

Reits are a cross between bonds and equities, with regular dividends and capital appreciation gains. They invest in real estate directly, either through properties or mortgages, and can be sold like stocks on major exchanges.

‘There is huge potential for Reits in a big and rapidly developing country like China,’ Mr Zhu said, adding that his office would consider opening an international board for foreign firms to sell shares in China.

‘Some institutions have suggested we open such a board and there is also great demand for it. We will actively study it and launch it when the conditions are ripe.’

Mr Gui Minjie, the vice- chairman of the China Securities Regulatory Commission, said at the same forum that Beijing would steadily encourage domestic mutual funds to venture abroad under the Qualified Domestic Institutional Investor scheme.

He said China’s fund industry had significant potential for further growth, especially as the country’s pension funds would expand to around US$1.8 trillion (S$2.64 trillion) by 2030 as the population ages.

Source: REUTERS (The Straits Times 12 Oct 07)

World’s wealthy still eyeing property

They are undeterred by the market turmoil triggered by the US sub-prime crisis

(GENEVA) The wealthy have lost none of their appetite for property despite the market turmoil triggered by the sale of risky sub-prime mortgages in the US, according to some of the world’s top private bankers.

Clients of wealth managers are, however, on the lookout for the next big areas of growth and want products that will enable them to reduce their exposure to any one property or market.

‘We’re seeing heavy levels of investment in property in Hong Kong (and) throughout Asia,’ said Peter Flavel, global head of private banking at Standard Chartered. ‘You can’t get office space in Singapore, you can’t get it in Dubai.’

Speaking at the Reuters Wealth Management Summit, Mr Flavel said there was a ‘group of Asians that love real estate’ and that their ardour showed no sign of fading. ‘They’d see the situation in America as specific to America and the situation in the UK as specific to the UK,’ he added.

Samir Raslan, head of Citibank’s wealth management operations in central and eastern Europe, Middle East and Africa, said his clients also remained alive to potential opportunities in world real estate markets.

‘We haven’t seen any change in our clients,’ he told the summit held at Reuters offices here.

Nicolas Cagi Nicolau, global head of structured product solutions at SG Private Banking, said demand so far in 2007 had been particularly strong.

In Ireland, where fortunes have been made on the back of the country’s decade-long property boom, a fast-cooling domestic market and recent global market turmoil may have had a short-term impact, but investors’ love of property is intact.

‘All that we may be seeing is that people are just waiting to see what may well happen either domestically or internationally, but the appetite for further investment is undoubtedly there,’ said Mark Cunningham, managing director of Bank of Ireland Private Banking.

He said his main problem was persuading Ireland’s growing ranks of self-made millionaires to diversify into assets other than real estate. ‘The first love has always been property and will continue to be property for a lot of these people.’ In Spain, which like Ireland is experiencing a rapid cooling in its property market, the wealthy remain committed to real estate, although not necessarily in their own country.

Daniel de Fernando, head of asset management and private banking at Spain’s BBVA , said a new product offering clients a chance to invest in the Mexican property market had proved particularly popular. ‘People are asking us for more ideas on that front,’ he said of a fund bought into by 60 people within two weeks of its launch at a minimum investment of 2.5 million euros (S$5.2 million) each.

In the Netherlands, property also continues to be popular, according to Bernard Coucke, deputy chief of private banking at ING Groep. ‘On the contrary, more and more programmes are being set up, not only in residential but also commercial. Why? Because, for instance in the Netherlands, demand is high . . . and I think it will continue to go up.’

For some rich investors, however, there is a growing belief that other assets can offer better returns.

‘I think that the appetite for real estate is decreasing a lot,’ Paolo Molesini, head of private banking at Italy’s Intesa Sanpaolo said of a country where up until now the wealthy have held about 70 per cent of their assets in property.

‘Property costs a lot and gives you a very, very low revenue . . . There is no equilibrium from the price of the asset and the earnings that you can get out of it.’ Mr Molesini said his clients were looking to invest in foreign property, particularly in Germany, eastern Europe and Paris.

 

Source: Reuters (Business Times 11 Oct 07)

Yanlord projects draw strong response

It pre-sells 1b yuan worth of properties for three of its developments

YANLORD Land Group, China’s high-end real estate developer, yesterday said it has pre-sold nearly one billion yuan (S$197 million) worth of properties in the month of September for three of its projects.

The company, which was included in the PrimePartners China Index (PPCI) yesterday , said it released and presold a total of 31 duplex apartment units for the second phase of Yanlord Riverside City in Shanghai last Friday.

All the units, representing a total gross floor area (GFA) of 15,113 sq m, were taken up on the day of the launch.

This grossed Yanlord 527.8 million yuan in pre-sale proceeds. The average selling price for this project surged 44 per cent to 34,924 yuan per sq m from 24,289 yuan per sq m achieved in July 2007.

Also on the same day, Yanlord released a total of 150 apartment units of Bamboo Gardens (Phase three) in Nanjing. Of that, 104 apartment units were sold on the day of the launch. That’s a take-up rate of 69 per cent. Total GFA of 13,474 sq m was pre-sold, grossing an aggregate of 144.5 million yuan in pre-sales proceeds.

The average selling price for this development increased 26 per cent to 10,726 yuan per sq m from 8,500 yuan per sq m in May 2007.

The third project is in the southern city of Zhuhai. Yanlord said it released a total of 228 apartment units under the first phase of Yanlord New City Garden on Sept 16. Of that number, 180 apartment units were sold on the first day. The take-up rate was 79 per cent. Total GFA of 27,984 sq m was pre-sold, grossing an aggregate of 257.4 million yuan in pre-sale proceeds.

The average selling price for this development rose 15 per cent to 9,200 yuan per sq m, from 8,000 yuan per sq m achieved in May 2007.

Yanlord said the strong response to its projects reflects the robust underlying demand for quality accommodation.

This is underscored by the strong economic performance, rising affluence of its population and the increasing urbanisation in mainland China.

Yanlord is one of investors’ favourite China stocks listed on the Singapore Exchange. Since news about its inclusion in the PPCI late last week, and in anticipation of the liquidity inflows from China following the set-up of new Qualified Domestic Institutional Investor funds, its share price has been chased up by 23 per cent to $4.22 yesterday.

 

Source: Business Times 2 Oct 07

HK man wins payout for China house

Local paper says amount was about 12m yuan, a record compensation

(HONG KONG) A Hong Kong man whose refusal to sell his house in China held up a massive property development has won a record payout.

Choi Chu-cheung and his wife held out for more than a year for more compensation for their house, blocking the construction of an 88-storey skyscraper in the heart of the southern Chinese boomtown of Shenzhen.

Despite repeated intimidation from developers and an eviction order from the local government, Mr Choi rejected a 5.06 million yuan (S$1 million) offer, which he said was just a third of the plot’s value.

After watching all his neighbours move out, the 57-year-old finally won what he called a ‘reasonable’ payout for his six-storey house in an out-of-court settlement with the developers.

‘The offer was reasonable and we accepted it. It’s worth it. Without the law and our determination to fight for the compensation, there was no way we would have done it,’ Mr Choi told AFP.

‘We had a lot of sleepless nights in the past year but we are happy now.’

Although he would not reveal the exact amount he received, Mr Choi said the figure was ‘very near’ the 14 million yuan he had demanded, and the couple have already spent one million yuan on a new house nearby.

Wen Wei Po, a Beijing-backed newspaper here, said the amount was about 12 million yuan, a record compensation for properties in the fast-growing city.

Mr Choi had said he was inspired by a couple in the southwestern city of Chongqing whose house attained almost iconic status because of their three-year refusal to move for a huge property project.

Wu Ping’s struggle against the developers earned her the nickname ‘Stubborn Nail’ as her two-storey brick house sat in the middle of an excavated construction pit.

The house was finally demolished after a court said the couple would be given a new home nearby and 900,000 yuan in damages.

Property disputes are rife in China, often involving illegal land grabs by developers in collusion with the government.

The national parliament passed a landmark law solidifying private property rights earlier this year partly to combat such disputes.

 

Source: AFP (Business Times 2 Oct 07)

China tries to cool property market

Downpayment for second homes, commercial properties raised

(SHANGHAI) China has announced another package of measures to cool the country’s red-hot property market, including raising the the down payment requirement for second homes to 40 per cent.

‘Domestic property prices are rising quite fast and there are obviously irrational factors behind this,’ the central bank and the China Banking Regulatory Commission said in a joint statement released late on Thursday.

The statement said commercial banks were facing ’significantly higher risks’ and if property prices became too volatile, a surge in bad loans was likely to follow.

As part of the new measures, which take effect immediately, the down payment requirement for people buying a second home was raised to 40 per cent from 30 per cent.

The down payment required for commercial properties such as offices was also raised to 50 per cent from 40 per cent.

Further, mortgage rates for second homes and commercial properties must now be at least 1.1 times the benchmark lending rate, the statement said.

Previously the minimum was equal to the benchmark rate.

The statement said banks were banned from providing loans to developers that had been found hoarding land or houses, and that real estate vacant for more than three years must not be accepted as collateral for bank loans.

China has, since 2005, taken many steps, including interest rate hikes and imposing taxes, to curb rapidly rising real estate prices amid concerns of a dangerous bubble in the sector.

Interest rates have been hiked five times this year alone, most recently on Sept 15, with apparent little effect.

Property prices in 70 major cities across the country rose 8.2 per cent in August from a year earlier, the fastest so far this year, according to official data.

Property prices in Beijing were up 12.1 per cent in August year-on-year and 20.8 per cent in southern Shenzhen, a booming city just across the border from Hong Kong.

 

Source: AFP (Business Times 29 Sept 07)

Marriott to double Beijing hotels

(NEW YORK) Marriott International Inc, the world’s largest hotel operator, said it plans to more than double the number of properties it has in Beijing by the 2008 Olympics.

It will open another 20 hotels in China through 2010, Marriott said on Tuesday in a statement. The expansion in China, which has about 12,000 hotels, is part of a push by Marriott and rivals such as Wyndham Worldwide Corp to double their rooms in Asia and take advantage of rising affluence and more travel. Two million people are expected to travel to Beijing for the Olympic games.

The JW Marriott Hotel Beijing, with 23 stories and 588 rooms, will be the company’s 3,000th property worldwide and is slated to open in November. The same month, Marriott’s 305-room Ritz-Carlton Beijing will also debut.

Marriott fell US$1.46, or 3.3 per cent, to US$43.25 at 4.01 pm in New York Stock Exchange trading.

 

Source: Bloomberg (Business Times 27 Sept 07)

China set to hike home rate

Expected mortgage rate rise to 8.613% aimed at reining in property prices

(BEIJING) China’s central bank is expected to increase the interest rate of mortgage loans to 1.1 times the benchmark one-year lending rate this week to curb the property market, state media reported yesterday.

If the rise goes ahead, the interest rate for five-year mortgage loans could be as high as 8.613 per cent, China Daily reported, quoting unnamed sources. The current five-year lending rate reached 7.83 per cent after the People’s Bank of China raised the interest rate for the fifth time this year on Sept 13.

The expected move is aimed at clamping down further on property speculation in a bid to curb soaring real estate prices, the report said.

‘With the expansion of mortgage loans, and as the central bank continuously raises interest rates, mortgage loans are beginning to face a high risk of default,’ said China Construction Bank, the lender with the highest mortgage loans in China, in its latest report.

Total non-performing mortgage loans in three major commercial banks – China Construction Bank, the Industrial and Commercial Bank of China, and Bank of China – rose to 19.2 billion yuan (S$3.82 billion) at the end of 2006, from 18.4 billion yuan in 2005, it said.

The central bank is also likely to announce a new policy raising mortgage downpayments to 40 per cent for secondtime home buyers before next week, the Shanghai Securities News reported, citing commercial bank sources.

Downpayments on commercial mortgages will also be raised, the report said, without elaborating. The minimum deposit for an apartment less than 90 sq m (970 sq ft) is currently 20 per cent, rising to 30 per cent for bigger apartments.

 

Source: AFP (Business Times 27 Sept 07)

Carlyle eyeing deals in India, Japan, China

It plans to focus on strategic partnerships as it expands in Asia

(HONG KONG) The Carlyle Group hopes to seal its first property deal in India this year and is buying homes for the elderly in Japan, as the private equity firm’s real estate arm looks to make inroads in Asia.

In an interview, Jason Lee, Carlyle’s head of Asia property investment, also said he would consider buying out underperforming real estate investment trusts (Reits) in Japan and taking stakes in Chinese and Indian developers.

With about US$410 million of equity already in Chinese and Japanese property, Carlyle is turning to India’s thriving economy – first partnering with developers on projects, with second-tier cities such as Chennai, Pune and Hyderabad favoured.

‘We’re working on a number of investments we hope will close,’ Mr Lee said. ‘Our strategy is really to focus on strategic partnerships, firstly and foremost.’ Like most foreign investors, Mr Lee is keen to help fill India’s estimated shortfall of 20 million homes. Internal rates of return on development are typically 20-30 per cent, and cash is easily regenerated through home sales.

Owning office blocks or malls is riskier in the immature property market because they can be difficult to sell.

India’s property industry has been buzzing since rules on inbound investment in the construction industry were eased in early 2005, prompting an influx of private equity funds such as those run by Morgan Stanley and Citigroup.

Property prices in major cities have doubled in the last two years, but have cooled in the last couple of months because the soaring market and rising interest rates started to pinch even the most upwardly mobile of India’s growing middle class.

‘In Mumbai, New Delhi and Bangalore, sure, there’s a general concern about pricing,’ Mr Lee said. ‘But when you move out to places like Pune, Hyderabad, Chennai … all these cities have great potential.’

In Japan, Carlyle is eschewing expensive Tokyo but hopes to tap growing demand for ’senior housing’ among a fastageing population by partnering with a unit of Tokio Marine & Nichido Fire Insurance Co in a joint venture that will buy and refurbish buildings for senior housing.

Mr Lee said the first deal in a 18- to 24-month acquisition programme would come ‘within the next several weeks’, with the portfolio likely to be finally worth US$500 million.

‘We’re looking at the demographics and trying to get into emerging sectors, where we think there’s tremendous growth,’ Mr Lee said.

Some estimates show Japan will have one person over 65 to every two of working age by 2025, a higher dependency ratio than any other major industrialised country. Now pensioners make up nearly a quarter of the 127 million population, and over-50s hold 75 per cent of Japan’s individual wealth.

Carlyle, which has spent US$170 million to build up a portfolio of shopping centres in Japan with asset management firm SOW Inc, would also consider buying Japanese Reits and taking them private.

Japan’s US$40 billion property trust market has ended a five-year bull run with a steep fall. Several Reits are down more than 20 per cent in the last month, and around half of the 41 trusts now trade at a discount to net asset value – with residential portfolios doing particularly badly.

‘We believe this is one area of opportunity in the near future,’ Mr Lee said. He added that non-recourse loans were easily available and only ‘marginally’ more expensive in Japan after the US sub-prime crisis sparked a credit crunch in many global markets.

In a strategy also employed by Morgan Stanley’s property arm, Carlyle is looking to take equity stakes in ambitious developers in China and India, once it develops a good partnership on individual projects.

In China, the company has five investments and is looking to partner developers in building more housing in secondary cities. For example, Carlyle recently partnered a local developer called Capland Property Development Group in Qingdao.

 

Source: Reuters (Business 27 Sept 07)

Taipei housing market confidence dips

Rising prices push figure down to lowest in 4 years

(TAIPEI) Taipei housing market confidence dropped to its lowest in almost four years because of rising prices, a Taiwan government-sponsored survey showed.

The housing confidence index for Taiwan’s capital fell to 97.55 in the second quarter, slipping below 100 for the first time since the third quarter of 2003, the Institute for Physical Planning & Information wrote in a report. A score lower than 100 means most respondents view conditions as poor.

Residential property in Taipei cost an average NT$316,000 (S$14,331) per ping in the second quarter, an increase of NT$54,000 per ping from a year earlier, the report said. Each ping equals 3.3 square metres.

People paid an average NT$9 million for a home in Taipei in the second quarter, down from NT$9.3 million a year earlier, according to the report posted on the institute website. The survey polled 1,233 people who had already bought a house, 895 people who were looking to buy, and 744 people looking to rent.

Taiwan’s Council for Economic Planning and Development, which sponsored the survey, decided to cancel its press briefing on the release because it indicated a slowdown in the island’s property market, the Economic Daily News reported yesterday.

Taiwan’s central bank on Sept 20 raised its discount rate on 10-day loans by an eighth of a percentage point to 3.25 per cent, compared with the 4.75 per cent benchmark interest rate in the US.

That resulted in an exodus of money as individuals and companies invest in higher-yielding assets abroad.

Taiwan residents invested a net US$17.2 billion in overseas securities in the second quarter, the biggest quarterly net outflow on record, the island’s central bank said in August.

 

Source: Bloomberg (Business Times 25 Sept 07)

Shanghai properties draw pension funds

JLL: Foreign insurers may buy in as yields dip see short-term investors exiting

( SHANGHAI) Overseas pension funds and insurers may become main buyers of premium office and commercial properties in Shanghai as shorter-term investors could sell due to falling yields, Jones Lang LaSalle (JLL) said last week.

Property investors with a relatively short-term investment horizon, such as banks and private equity firms, may have achieved their return targets and consider selling, especially when investment yields are being compressed, it said.

‘Some of the opportunistic and value-added investors will now be looking to sell because they have met their IRR (internal rate of return) targets,’ the property consultancy said in a press release.

‘Consequently, we believe that the number of core assets up for sale will rise as these funds realise their investments,’ it said, adding that long-term investors such as pension funds and insurance firms would likely become the buyers.

Several long-term investors last year bought major projects, including the US$188 million acquisition of a Shanghai office property by German pension fund SEB, it said.

Greg Hyland, a JLL director, told reporters he didn’t expect an immediate wave of investment from foreign insurers and pension funds in Shanghai’s property market – partly because China is trying to cool its property market and some of the recently introduced measures would complicate cross-border transactions.

Rents and capital value of Shanghai office and commercial properties are expected to rise, but growth would be ‘less explosive’ than in 2000-2006 when rents rose 14 per cent annually, JLL said.

Opportunistic investors, who typically hold properties for three to five years, have already been hunting for property projects in second-tier Chinese cities for higher yields, it said.

Foreign investors, including Wall Street banks Goldman Sachs and Morgan Stanley, have poured billions of dollars into Shanghai properties over the past few years, partly driven by China’s currency appreciation.

Strong price rises in Shanghai and other major Chinese cities such as Beijing have driven down rental yields.

Gross yields on Shanghai office property fell to below 8 per cent in 2006, although they are still higher than the around 5 per cent in Hong Kong and Singapore and 4 per cent in Tokyo, and most fixed-income products, property consultancy CBRE has said.

JLL said that Shanghai’s office property market is becoming attractive to long-term investors because of the steady demand from international corporations and the growing supply of grade-A office towers.

The occupancy rate of high-end offices in Shanghai may stay at around 90 per cent over the next three years, with investment-grade office supply likely to peak in 2010 – when total space should reach 6.2 million square metres, JLL said.

 

Source: Reuters (Business Times 25 Sept 07)

Funding squeeze tightens as China reins in asset markets

Policy shift could spell trouble for stock, property markets: analysts

(SHANGHAI) A massive squeeze in China’s money market suggests the authorities are getting serious about reining in soaring asset markets to control inflation.

Funding squeezes have occurred a few times this year in response to initial public offers of equity and seasonal demand for money. But the current drought of funds is much harsher than previous ones and is set to last longer.

In contrast to past squeezes, this one is largely the result of initiatives by the authorities to cool the stock market and reduce the amount of funds available for bank lending, much of which is going into the property market.

In the past, the central bank balanced supply and demand for funds more carefully to limit spikes in short-term interest rates. This time, rates have largely been left to soar unchecked as the authorities soak up money from the market.

‘Authorities are shifting their focus to the stock market and to commercial banks’ lending growth, while putting less focus on short-term volatility in money market rates,’ said Chai Cipeng, a fixed-income trader at Daiwa SMBCSSC Securities in Shanghai.

The shift in policy priorities could spell trouble for the stock and property markets in coming months. It could also mean a difficult time for Chinese fixed-income investors until stock and property prices finally show signs of cooling down.

The weighted average seven-day repo rate, a key measure of short-term liquidity, surged to a multi-year high of 6.6942 per cent yesterday – far exceeding this year’s previous peak of 4.77 per cent, hit in April.

Because the squeeze is expected to last until early October, when money will return to banks after a long holiday period, the average one-month repo, usually more stable, also jumped yesterday, hitting a multi-year high of 7.2092 per cent against this year’s previous peak of 4.45 per cent.

Trade in bills and bonds almost halted this week as desperate banks lack the money to trade. While the central bank has reduced money market draining operations, the resulting net injection is dwarfed by the hundreds of billions of yuan that the market is being required to provide.

Net injections of that scale are ‘not enough in this environment’, said Shi Lei, an analyst at Bank of China.

The squeeze is largely due to the planned sale of big volumes of special bonds to the market this month, a form of monetary tightening, and by record IPOs in quick succession from China Construction Bank and Shenhua Energy, part of efforts to cool the stock market by boosting supply of equity.

The steps are being taken just a week after China announced August consumer price inflation jumped to a 10-year high of 6.5 per cent from July’s 5.6 per cent.

 

Source: Reuters (Business Times 21 Sept 07)

Sunshine to acquire China property firm for 61m yuan

Henan Jinjiang has 2 mixed-devt projects in Zhengzhou

SUNSHINE Holdings is buying a China property company for 61 million yuan (S$12.2 million).

The acquisition, Henan Jinjiang Real Estate Co Ltd, will be 90 per cent owned by Xinxiang Huilong Real Estate Co Ltd and 10 per cent by Henan Huilong Property Management Co Ltd. The latter two companies are wholly owned subsidiaries of Sunshine.

Sunshine said Henan Jinjiang is a property developer, with two projects in Zhengzhou.

Zhengzhou, the capital city of Henan province, has a population of 3.5 million and a gross domestic product of 165 billion yuan in 2005. The two projects – Zhong Mou Project (site area: 76,000 sq metres) and Yan Ming Hu Project (779,000 sq metres) – are mixed developments. Both are expected to see revenue contribution from FY2008.

Sunshine said the total planned GFA for the Zhong Mou project – strategically located near the Civic District – is about 97,000 square metres. About 80 per cent will be allocated for residences and the rest commercial development.

The estimated average selling price is between 2,500 yuan and 3,500 yuan per square metre for residential space and about 4,000 yuan per square metre for commercial space.

As for the Yan Ming Hu project, the total planned GFA is about 274,000 square metres and will comprise deluxe residential with facilities for business conferences. The estimated average selling price for residential space is about 10,000 yuan per square metre.

Sunshine said the purchase will be satisfied from internal resources and borrowings.

Listed on the Singapore Exchange mainboard in March 2006, Sunshine is one of the rapidly growing property developers in Henan province and has successfully carved a niche in developing properties in second and third-tier China cities.

Yesterday, the shares closed trading at 35 cents each, compared with its initial public offer price of 27.5 cents.

 

Source: Business Times 21 Sept 07

China property investment swells 29%

Investments total 1.4 trillion yuan in Jan-Aug 2007

(BEIJING) Investment in China’s property sector soared to 1.43 trillion yuan (S$285.5 billion) in the first eight months, 29 per cent up from the same period last year, according to the National Bureau of Statistics (NBS).

Of the total, 1.02 trillion yuan went to commercial housing, an increase of 30.9 per cent while 44.9 billion yuan went to economically affordable housing, an increase of 28.8 per cent.

By the end of August, China had 119 million square metres of vacant commercial buildings, down 2 per cent over the same period last year.

In the first eight months, developments on 162 million sq m of land were completed, an increase of 15.3 per cent, according to the NBS.

China’s real estate climate index rose to 104.48 points, up 0.48 points from last month and 1.17 points from a year ago.

The index, reflecting the nation’s current property market situation and development trends, includes sub-indices such as investment, sources of capital, floor space of marketable yet unsold buildings, areas of land developed and he floor space of buildings under construction.

The market is considered to be heating up when the index exceeds 100.

China’s housing price hikes accelerated last month despite a spate of government control measures.

Prices in 70 large and medium-sized cities were up 8.2 per cent in August over the same month last year, or 0.7 percentage points higher than the July rate.

 

Source: Xinhua (Business Times 20 Sept 07)